r+)<i  ^ 


THE  LIBRARY 

OF 

THE  UNIVERSITY 
OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


THE 

ORGANIZATION   AND   MANAGEMENT 
OF  BUSINESS  CORPORATIONS 


By  WALTER  C.  CLEPHANE,  LL.M. 

OF  THE   BAR  OF  THE    SUPREME    COURT  OF   THE    UNITED    STATES;    PROFESSOR    OF    THE 

LAW     OF    THE    ORGANIZATION     AND     MANAGEMENT    OP    CORPORATIONS     IN 

THE    GEORGE   WASHINGTON   UNIVERSITY   OF   WASHINGTON.  D.  C. 


ST.  PAUL,  MINN. 

WEST   PUBLISHING   CO. 

1905 


COPYRIGHT,  1905, 

BY 
WALTER   C.   CLEPHANE. 

T 


AUTHOR'S   PREFACE. 


A  FEW  years  ago  a  course  of  lectures  was  inaugurated  in  the 
Law  Department  of  the  Columbian  (now  The  George  Wash- 
ington) University,  of  Washington,  D.  C.,  dealing  with  the  or- 
ganization and  practical  management  of  business  corporations. 
Prior  to  that  time  the  substantive  law  of  corporations  had  been 
most  ably  taught  in  that  department  by  a  distinguished  jurist 
occupying  a  seat  on  the  bench  of  the  Supreme  Court  of  the 
United  States.  But  because  of  the  growing  tendency  of  mod- 
ern business  men  to  incorporate,  there  arose  a  demand  for  a 
short  practical  course  informing  the  students,  who  were  to  enter 
upon  the  active  duties  of  their  profession,  exactly  how  to  apply 
the  principles  they  had  learned  at  the  feet  of  so  eminent  an 
instructor,  and.  starting  with  the  request  of  the  client  that  his 
business  be  incorporated,  how  to  go  through  the  successive 
stages  essential  to  a  valid  and  successful  organization.  The 
university,  ever  ready  to  keep  pace  with  modern  'conditions, 
responded  to  the  call,  and  the  new  chair  was  entrusted  to  the 
author. 

Much  to  his  regret,  he  found  no  text-book  dealing  with  the 
subject  in  such  a  way  as  to  enable  him  to  place  it  in  the  hands 
of  his  students.  He  was  obliged,  therefore,  to  map  out  the 
course  for  himself  in  a  series  of  lectures  extending  over  a  few 
weeks.  Those  lectures  form  the  basis  of  this  treatise,  which 
has  been  compiled  as  a  text-book  for  the  classes  studying  this 
subject  in  The  George  Washington  University.  The  author 
has  also  had  in  view  the  needs  of  many  lawyers  who  may  not 
have  had  the  advantages  of  practical  corporation  office  work, 

(iii) 


708601 


iv  AUTHOR'S  PREFACE. 

and  who,  therefore,  may  desire  some  guide  along  the  lines  re- 
ferred to.  It  is  believed,  too,  that  many  laymen  who  are 
officers  of  corporations  will  find  the  book  useful  to  them  in 
carrying  on  their  work. 

The  object  of  the  author  being  as  above  stated,  no  attempt 
has  been  made  to  enter  into  a  discussion  of  principles,  except 
in  so  far  as  such  discussion  is  pertinent  to  some  live  topic  of 
practical  corporation  law  of  frequent  recurrence  in  modern 
times,  but  which  may  not  be  considered  as  fully  settled.  The 
volume  does  not  pretend  to  be  a  treatise  on  corporation  law, 
but  may  be  said  to  bear  the  same  relation  to  that  subject  as 
equity  pleading  and  practice  bears  to  equity  jurisprudence. 
Principles  have  been  stated,  an  understanding  of  which  is  es- 
sential to  the  intelligent  organization  of  corporations  and  atten- 
tion to  the  details  of  their  management.  Great  care  has  been 
taken  to  verify  and  support  by  citations  every  principle  of  law 
herein  laid  down.  Inasmuch  as  corporation  law  is  a  subject 
of  very  rapid  development  during  the  past  few  years,  in  many 
instances  the  author  has,  without  designating  specific  cases, 
referred  to  the  most  recent  works  on  the  subject,  where  a  full 
discussion  of  the  topics  involved,  with  the  cases  applicable 
thereto,  will  be  found.  Frequent  reference  has  thus  been  made 
to  the  very  recent  and  admirable  treatises  on  the  law  of  corpo- 
rations by  Messrs.  Clark  and  Marshall,  and  Mr.  William  W. 
Cook.  Numerous  citations  will  also  be  found  of  the  tenth  vol- 
ume of  the  Cyclopedia  of  Law  and  Procedure,  published  dur- 
ing the  present  year,  which  consists  almost  wholly  of  a  revised 
work  on  corporation  law  by  that  master  of  the  subject,  the  late 
Hon.  Seymour  D.  Thompson. 

Many  forms  have  been  inserted  which  may  be  used  in  any 
jurisdiction.  Forms  corresponding  to  those  which  appear  in 
some  form  books,  and  which  are  merely  local  in  their  character, 
will  not  be  found  here.  In  many  instances  the  state  statutes 
prescribe  so  minutely  what  must  appear  in  certain  corporation 
papers,  and  these  statutes  differ  so  materially  one  from  an- 
other, that  it  has  been  found  that  the  insertion  of  forms  in  such 


AUTHOR  S   PREFACE.  V 

instances,  intended  to  be  general  in  their  nature,  has  resulted 
in  more  harm  than  good. 

While  fully  conscious  that  crudities  and  imperfections  must 
exist  in  this  work,  the  author  submits  it  to  the  kind  judgment 
of  the  public,  in  the  hope  that  it  may  never  prove  misleading, 
but  may  serve  as  a  convenient  source  of  information  to  those 
seeking  guidance  in  this  field  of  research. 

WALTER  C.  CLEPHANE. 

Washington,  D.  C.,  January  1,  1905. 


TABLE  OF   CONTENTS. 


INTRODUCTION. 

Sec. 

A.  History  of  Corporations 1 

B.  Reasons  for  Incorporating •  •  •  •  5 

C.  Incidents   of   Corporations 10 

D.  Theories  Regarding  Corporations 11 

E.  Extraterritorial   Rights  of  Corporations 13 

F.  Citizenship  of  Corporations 15 


CHAPTER  I. 
SELECTION  OF   A   DOMICILE. 

A .  Matters  to  be  Considered 16 

P>.  Laws  of  Maine 22 

C.  "      "  Massachusetts   23 

D.  "       "  Connecticut    24 

E.  "       "  New  York  25 

F.  "       "  New  Jersey   26 

G.  "      "  Dela-ware    27 

H.        "       "  District  of  Columbia 28 

1.         "      "  Virginia    29 

J.         "       "  West  Virginia 30 

K.        "       "  South  Dakota 31 

L.        "      "  Nevada    32 

M.        "       "  Porto  Rico 33 

N.  Comparison  of  Foregoing  Laws 34 

CHAPTER  II. 

INCORPORATORS  AND  SUBSCRIPTIONS  TO  STOCK. 

A.  Nonresidents    45 

R.  Corporations    46 

C.  Infants    47 

D.  Married  Women   48 

CLEPH. Bus. CORP.  (vii) 


Vlll  TABLE    OF    CONTENTS. 

Sec. 
B.  Aliens    49 

F.  Subscriptions  for   Stock 50 

G.  Valid  Subscription  Agreements 52 

H.  Form  of  Subscription  Agreements 54 


CHAPTER  III. 
CERTIFICATE   OF  INCORPORATION. 

A.  Modes  of  Organizing  Corporations 55 

B.  Powers   of  Corporations 58 

C.  Contents  of  Certificate 60 

(1)  Name    62 

(2)  Objects   64 

(3)  Powers    6(i 

(a)  To  Conduct  Business  in  Other  States u^ 

(b)  To  Create  Voting  Trusts 69 

(c)  To   Cumulate   Votes 70 

(d)  To  Directors  to  Dispose  of  Entire  Property....  71 

(e)  To  Hold  Directors'  Meetings  Outside  of  State. . .  72 

(f)  To  Take  Action  Outside  of  Meeting 73 

(g)  To  Regulate  Inspection  of  Records 74 

(h)  To  Directors  to  Mnke  and  Amend  By-Laws....  7.~> 

(i)    To  Create  Executive  Committee 76 

(4)  Capital  Stock 78 

(5)  Names  and  Residences  of  Incorporators 79 

(6)  Number  of  Shares  Subscribed 80 

(7)  Life  of  Corporation 81 

(8)  Signatures  82 

(9)  Acknowledgment    83 

(10)  Forms    84 

(a)  Charter  U.   S.  Steel  Corporation 84'v 

(b)  Object  Clauses. 

(b1)  Mercantile  Business  84c 

(b2)  Department  Store 84<1 

(bs)  Contracting  Company   84e 

(b*)  Mining   Company 84f 

(b&)  Apartment  House  Company 84g 

(c)  Clauses  Regulating  Business. 

(ci)  Executive  Committee 85 

(C2)  Action  Taken  Outside  of  Meeting 85a 

(cs)  Directors  Selling  Business  as  an  Entirety  851  > 

(c*)  Cumulative  Voting 8~>r 


TABLE   OF   CONTENTS.  IX 


CHAPTER  IV. 

ESSENTIALS  OF  INITIAL  MEETINGS  OF  INCOR- 
PORATORS. 

Sec. 

A.  Place  of  Holding 86 

B.  Proxies   88 

C.  Time  of  Holding 89 

P.  Waiver  of  Notice  of  Minting 90 

E.  "          "         "        "Assessment 91 

F.  "         "        "       "  Increase  of  Capital 92 

G.  Transfer  of  Subscription 94 

H.  Notice  of  Meeting 95 

I.  Quorum    96 


CHAPTER  V. 

PROCEEDINGS  AT  FIRST  MEETING  OF  IN- 
CORPORATORS. 

A.  Formal  Matters 98 

B.  By-La  ws  103 

C.  Election  of  Direc-tors 105 

D.  "         "    Officers    113 

E.  Authority  to  Directors  to  Assess  Stock 114 

F.  Payment  for  Stock 115 

G.  Authority  to  Issue  Incorpora tors'   Stock 117 

H.                      •       •       stock  to  Charter  Limit 118 

I.            "           "     Establish  Office  and  Appoint  Agent 119 

J.   Corporate  Seal  120 

K.  Form  of  Stock  Certificate 121 

L.  Issue  of  Preferred  Stock 122 

M.  Salaries  to  Officers 123 

N.  Miscellaneous   124 

O.  Adjournment 125 

P.  Minutes    126 

(1)  Form  of 127 


X  TABLE   OF   CONTENTS. 

CHAPTER  VI. 

BY-LAWS. 

Sec. 

A.  Object   12!) 

B.  Contents 131 

C.  Amendments  134 

D.  Forms    135 

CHAPTER  VII. 

FIRST  MEETING  OF  DIRECTORS. 

A.  Place  of  Holding 138 

B.  Proxies   130 

C.  Time    of    Holding 140 

D.  Waiver  of  Notice 141 

E.  Proceedings 142 

(1)  Formal    Matters 142 

(2)  Election  of  Officers 144 

(3)  Secretary's  Oath 144a 

(4)  Treasurer's   Bond 140 

(5)  Electing   Executive   Committee 148 

(6)  Issue   of   Stock 149 

(7)  Opening  Bank  Account 151 

(8)  Establishing  Office  and  Appointing  Agont 152 

(9)  Reports    154 

(10)  Procuring  Books 155 

(11)  Minutes    157 

(a)  Form  of  157 

(12)  Meeting  of  Executive  Committee 158 

CHAPTER  VIII. 

STOCK. 

A.  Common  Stork 10O 

B.  Preferred  Stock   101 

C.  Guarantied    Stock 1  (5'J 

D.  Founders'    Shares 103 

E.  Deferred    Stock 104 

F.  Overissued  Stock. .  .  Ki.'i 


TABLE   OF   CONTENTS.  XI 

Sec. 

G.  Special    Stock 166 

H.  Full-Paid  Stock 167 

I.    Issued  and  Outstanding  Stock 168 

.1.    Unissued  Stock 169 

K.  Treasury    Stock 170 

I,.  Watered  Stock 171 

M.  Characteristics    of  Preferred  Stock 172 

X.  Forms   178 

(1)  Common    Stock 178a 

(2)  Preferred    Stock 178b 

O.  Signatures   170 

P.  Registrar  180 

Q.  Price  of  Shares 183 

H.  Time  of  Issuing 184 

S.   Installment  Certificates 185 

T.  Assignments    187 

U.  Forfeiture 187a 

V.  Stubs 188 

W.  Transfers    189 

X.  Negotiability    .200 

Y.  Lost  Certificates  .  .  201 


CHAPTER  IX. 

MEETINGS. 

A.  Stockholders'  Meetings   203 

(1)  Place  of  Holding 203 

(2)  Notice  204 

(3)  Closing  of  Transfer  Books 205 

(4)  Annual  Reports  of  Oflicers 206 

(5)  Formal    Matters 208 

(6)  Order  of  Business 209 

(7)  Cumulative    Voting 210 

(8)  Proxies  211 

(9)  Voting  Trusts 213 

(a)  Form  of  213b 

B.  Directors'  Meetings  214 

(1)  Must  Act  as  a  Board 215 

(2)  Dividends    216 

(3)  Creating   Bonded    Indebtedness 217 

(a)  Forms  of  Bonds  217b 

(4)  Vacancies   218 

0.  Annual  Reports  to  State 219 


Xii  TABLE  OF  CONTENTS. 

CHAPTER  X. 

AMENDMENT  OF  CHARTER, 

Sec. 

A.  Procedure   ...............................................  220 

B.  Notice  of  Meeting  ........................................  222 

C.  Manner  of  Voting  ........................................  223 

D.  Disposition  of  Increased  Stock  ...........................  224 

E.  Certificate  of  Amendment  ................................  223 


CHAPTER  XI. 

REORGANIZATION. 

A.  Reasons  for  ..............................................  226 

B.  Meeting  of  Stockholders  of  Old  Company  ..................  227 

C.  "       "     Directors       "     "          "  .................  228 

D.  Proposition  from  Old  Company  ...........................  230 

E.  Meeting  of  Incorporators  of  New  Company  ...............  231 

F.  "        "    Board  of  Directors  of  New  Company  ..........  233 

G.  Acceptance  of  Proposition  by  New  Company  .............  ;  235 

H.  Formal  Transfer  of  Property  .............................  236 

I.   Payment  for  Property  Transferred  .........................  245 

J.    Donation  of  Stock  ..........  .  24G 


TABLE  OF  CASES  CITED. 
(Page  xiil) 

TABLE  OF  STATUTES  CITED. 

(Page  xxv) 


TABLE  OF  CASES  CITED. 


A 

Sec. 

Abernethy  v.  Society,  3  Daly  (N.  Y.)  1 126 

Adams  Exp.  Co.  v.  Railroad  Co.  (C.  C.)  16  Fed.  712 38e 

Alabama  Foundry  &  Machine  Works  v.  Dallas,  127  Ala.  513, 

20  South.  459 lloa 

Albright  v.  Ass'n,  102  Pa.  411 58 

Altoona  Gas  Co.  v.  Gas  Co.,  17  Pa.  Co.  Ct.  R.  662 62 

American  &  Foreign  Christian  Union  v.  Yount,  101  U.  S.  352, 

25  L.   Ed.   888 13 

Appleton  v.  Malting  Co.  (X.  J.)  54  Atl.  454 26 

Arms  v.  Conant,  36  Vt.  744 72c 

Aspinwall  v.  Railroad  Co.,  20  Ind.  492,  83  Am.  Dec.  329 72c 

Atkinson  v.  Atkinson,  8  Allen  (Mass.)  15 194 

B 

Bagley  v.  Oil  Co.,  201  Pa.  78,  50  Atl.  760,  56  L.  R.  A.  184....  227 
Rank  of  Augusta  v.  Earle,  13  Pet.  (U.  S.)  519,  10  L.  Ed.  274. ..     87 

13  Pet.  (U.  S.)  521,  10  L.  Ed.  274 87 

Bank  of  Fort  Madison  v.  Alden,  129  U.  S.  372,  9  Sup.  Ct  332.  32 

L.  Ed.  725  115a,  183 

Barney  v.  Baltimore,  6  Wall.  (U.  S.)  280,  18  L.  Ed.  825 38e 

Barstow  v.  Mining  Co.,  64  Cal.  388,  1  Pac.  349,  49  Am.  Rep.  705  200 

Barton  v.  Railroad  Co.,  24  Q.  B.  D.  77 .199 

Batchelor  v.  Bank,  78  Ky.  435 113 

Bates  v.  Wilson,  14  Colo.  140,  24  Pac.  99 60 

Bent  v.  Underdown,  156  Ind.  516,  60  N.  E.  307 60 

Bergman  v.  Ass'n,  29  Minn.  275,  13  X.  W.  120 134 

Bigelow  v.  Gregory,  73  111.  197 86 

Blanchard's  Gun  Stock  Turning  Factory  v.  Warner,  1  Blatchf. 

258,   Fed.  Cas.   Xo.   1,521 64 

Booth  v.  Fire  Engine  Co.,  118  Ala.  369.  24  South.  405 126 

Brackett  v.  Persons  Unknown,  53  Me.  228,  87  Am.  Dec.  548. .  126 
Bradley  Fertilizer  Co.,  In  re,  19  Pa.  Co.  Ct.  R.  271 : 62 

CLEPH. Bus. CORP.  (xiii) 


XiV  CASES   CITED. 

Sec. 
Braintree  Water-Supply   Co.  v.   Braintree,   146   Mass.   482,   16 

X.  E.  420 89a 

Brightman  v.  Bates,  175  Mass.  105,  55  N.  E.  809 2l3b,  213e 

Bronson's  Estate,  In  re,  150  N.  Y.  1,  44  N.  E.  707,  34  L.  R.  A. 

238,  55  Am.    St.   Rep.   632 25,   42 

Brown  v.  Steamship  Co.,  5  Blatchf.  525,  Fed.   Cas.  No.   2,025 

213b,   213e 
Byers  v.  Rollins,  13  Colo.  22,  21  Pac.  894 179 

c 

Cable  v.  Insurance  Co.,  191  U.  S.  288,  24  Sup.  Ot.  74,  48  L.  Ed. 

188  14 

Camden  v.  Stuart,  144  U.  S.  104,  12  Sup.  Ct.  585,  36  L.  Ed.  :'.•;:; 

lloa,  183 

Camp  v.  Byrne.  41  Mo.  525 87a,  87f 

Carroll  v.  East  St.  Louis,  67  111.  568,  16  Am.  Rep.  632 13 

Caulkins  v.  Gaslight  Co.,  85  Tenn.  683,  4  S.  W.  287,  4  Am.  St. 

Rep.  786 '. 196,    198 

Cecil,  In  re,  36  How.  Prac.  (N.  Y.)  477 108a 

Central  R.  R.  of  New  Jersey  v.  Railroad  Co.,  31  N.  J.  Eq.  475  26,  46 
Central  Transp,  Co.  v.  Car  Co.,  139  U.  S.  24,  11  Sup.  Ct.  478, 

35  L.    Ed.    55 59 

Chapman  v.  Bates,  61  N.  J.  Eq.  658,  47  Atl.  638,  88  Am.  St. 

Rep.  459 26,  41,  213b,  213d,  213e 

Chattanooga  Nat.  Building  &  Loan  Ass'n  v.  Benson,  189  U.  S. 

408,  23  Sup.  Ct.  630,  47  L.  Ed.  870 14 

Chew  v.  Bank,  14  Md.  299 101,  192 

Chicago  City  R.  Co.  v.  Allerton,  18  Wall.  (U.  S.)  233.  21  L.  Ed. 

902    71 

Chicago  &  N.  W.  R.  Co.  v.  Whitton,  13  Wall.  (U.  S.)  270,  20 

L.  Ed.  571 ir> 

Christ  Church  v.   Pope,  8  Gray   (Mass.)  140 105 

Christensen  v.  Quintard.  55  Hun.  608,  8  N.  Y.  Supp.  400 183 

Christian  College  v.   Hendley,  49  Cal.  347 50 

Chubb  v.  Upton,  95  U.  S.  665,  24  L.  Ed.  r>23 IS.", 

City  of  Aurora  v.  West,  9  Ind.  74 58 

City  of  St  Louis  v.  Ferry  Co.,  11  Wall.  (U.  S.)  423,  20  L.  Ed. 

1!»2    15 

Clark  v.  Bever,  139  U.  S.  96.  11  Sup.  Ct.  468.  35  L.  Ed.  88. .  183 
Clarke  v.  Banking  Co.  (C.   C.)  50  Fed.  338,   15  L.   R.  A.  683 

213c,  213e 
Cleveland  &  M.  R.  Co.  v.  Robbins,  35  Ohio  St.  483 201 


CASES   CITED.  XV 

fee. 

Clowes  v.  Miller,  60  N.  J.  Eq.  179,  47  Atl.  345 213c,  213e 

Coit  v.  Amalgamating  Co.,  119  U.  S.  343,  7  Sup.  Ct.  231,  30  L. 

Ed.  420 115a,   183 

Cone  v.  Russell,  48  N.  J.  Eq.  208,  21  Atl.  847 213c,  213e 

Congress  &  Empire  Spring  Co.  v.  Knowlton,  103  U.  S.  49,  26 

L.  Ed.  347 183 

Conrad  v.  La  Rue,  52  Mich.  83,  17  N.  W.  706 50 

Cottage  St.  M.  E.  Church  v.  Kendall,  121  Mass.  528,  23  Am. 

Rep.  286 .lO 

Cowdrey  v.  Vandenburgh,  101  U.  S.  572,  25  L.  Ed.  923 200 

Cowell  v.  Springs  Co.,  100  U.  S.  55,  25  L.  Ed.  547 13 

Craig  Silver  Co.  v.  Smith,  163  Mass.  262,  39  N.  E.  1116 87e 

Curamings  v.  Webster,  43  Me.  192 60 

Cm-ran  v.  Arkansas,  15  How.  (U.  S.)  304,  14  L.  Ed.  705 227I> 

Cushing's  Estate,  In  re,  40  Misc.  Rep.  505,  82  N.  Y.  Supp.  795    38e 

D 

Daly  v.   Insurance  Co.,  64  Ind.  1 3Sa 

Dartmouth  College  v.  Woodward.  4  Wheat.  (U.  S.)  518.  4  L.  Ed. 

629    47 

Davis  v.  Bank  of  England,  2  Bing.  393 191 

v.  Thomas  &  Davis  Co.,  63  N.  J.  Eq.  572,  52  Atl.  717...   123a 

Day  v.  Insurance  Co.,  75  Iowa,  694,  38  N.  W.  113 220 

Dean  v.   Baldwin,  99  111.  App.  582 115u 

De  La  Vergne  Refrigerating  Machine  Co,  v.  Savings  Inst.,  175 

U.  S.  40,  20  Sup.  Ct.  20,  44  L.  Ed.  66 46 

Demarest  v.  Flack,  128  N.  Y.  205.  28  X.  E.  645,  13  L.  R.  A.  854     13 
Dennis  v.  Mfg.  Co.,  19  R.  I.  666,  36  Atl.  129,  61  Am.  St.  Rep. 

805   126 

Dewing  v.  Perdicaries,  96  TJ.  S.  193,  24  L.  Ed.  654 197 

Dexter  v.  Hall,  15  Wall.  (U.  S.)  9,  21  L.  Ed.  73 192 

Dickerman  v.  Trust  Co.,  176  U.  S.  181,  20  Sup.  Ct.  311,  44  L. 

Ed.  423 183 

Dickson  v.  McMurray.  28  Grat.  Ch.  (Can.)  533 105a 

Donald  v.  Refining  Co.,  62  X.  .T.  Eq.  729,  48  Atl.  771. 26,  41 

Dooley  v.  Glass  Co.,  15  Gray  (Mass.)  494 87a 

1  >owning  v.  Potts,  23  N.  J.  Law,  66 108 

Doyle  v.  Insurance  Co.,  94  U.  S.  535,  24  L.  Ed.  148 14 

Ducat  v.  Chicago,  10  Wall.  (TJ.  S.)  410,  19  L.  Ed.  972 14,  15 

Duke  v.  Taylor,  37  Fla.  64,  19  South.  172,  31  L.  R.  A.  484,  53 

Am.  St.  Rep.  232 86,  87,  87d,  87e 

Duncan  v.  Jaudon,  15  Wall.  (U.  S.)  165,  21  L.  Ed.  142 193 


XVI  CASES   C1TEL). 


E 

Sec. 
East  Birmingham  Land  Co.  v.  Dennis,  85  Ala.  565,  5  Sk>uth. 

317,  2  L.  R.  A.  836,  7  Am.  St.  Rep.  73 200 

Eastern  Plank  Road  Co.  v.  Vaughan,  14  N.  Y.  546 60 

Election  of  St.  Lawrence  Steamboat  Co.,  In  re,  44  N.  J.  Law, 

529  108,   108a 

Elkins  v.  Railroad  Co.,  36  N.  J.  Eq.  233,  236 172,  175 

Ernest  v.  Nicuolls,  t>  H.  L.  Cas.  401 , 60,  84a 


F 

Fambro  v.  Gantt,  12  Ala.  298 194 

Faure  Electric  Accumulator  Co.  v.  Phillipart,  58  Law  T.   (N. 

S.)   525    '. 218 

Fifth  Ave.  Bank  v.  Railroad  Co.,  137  N.  Y.  231,  33  N.  E.  378, 

19  L.  R.  A.  331,  33  Am.  St.  Rep.  712 1S2,  182a 

Fisher  v.  Bush,  35  Hun  (N.  Y.)  641 213c,  213e 

Fitzgerald  &  Mallory  Const.  Co.  v.  Fitzgerald.  137  U.   S.  98, 

11  Sup.  Ct.  36,  34  L.  Ed.  608 123 

Floyd  v.  Loan  &  Investment  Co.,  49  W.  Va.  327,  38  S.  E.  653, 

54  L.  R.  A.  536,  87  Am.  St.  Rep.  805 14 

Fogg  v.  Blair,  139  U.  S.  118,  11  Sup.  Ct.  476,  35  L.  Ed.  104 

115a,  183 

Franco  Texan  Land  Co.  v.  Laigle,  59  Tex.  339 87 

Freeman  v.  Mill  Co.,  uS  Me.  343 87 

G 

Galveston  City  Co.  v.  Sibley,  56  Tex.  269 201a 

Galveston,  H.   &  H.   R.   Co.  v.  Cowdrey,  11  Wall.  4r,0,  20  L. 

Ed.  199 72a,  72c 

Gamble  v.  Water  Co.,  123  N.  Y.  91,  25  X.  E.  201,  9  L.  R.  A. 

527   217 

George  H.   Hammond   &   Co.   v.  Hastings,  134   U.    S.  401,    10 

Sup.  Ct.  727,  33  L.  Ed.  960 200 

Geyser-Marion  Gold  MAn.  Co.  v.  Stark,  106  Fed.  558,  45  C.  C. 

A.  467,  53  L.   R.  A.  684 193 

Gibbons  v.  Mahon,  136  U.  S.  549,  10  Sup.  Ct.  1057.  34  L.   Ed. 

."•IT,    216c 

Globe  Mut.  Ben.  Ass'n,  Matter  of,  13r>  X.  Y.  2*n.  I'M.  :\~2  X.  E. 

122,  17  L.  R.  A.  547 47 


CASES  CITED.  XV11 

Sec. 

Glucose  Sugar  Refining  Co.   v.   Sugar  Refining  Co.,   22  X.   J. 

Law  J.  147 62 

Gould  v.  Head,  38  Fed.  886 2l3c 

Graham  v.   Railroad  Co.,  118  U.  S.   161,  6  Sup.  Ct.   1009,  30 

L.  Ed.  196 87e 

Granger  v.  Brewing  Co.,  25  Misc.  Rep.  302,  54  X.  Y.  9upp.  590     113 

Griffith  v.  Jewett,  15  Wkly.  Law  Bui.  (Ohio)  419 213e 

Guilford  v.  Telegraph  Co.,  43  Minn.  434,  46  N.  W.  70 201a 

H 

Hadley  v.  Trust  Co.,  2  Tenn.  Ch.  122  ;   10  Cyc.  169 38a 

Hafer  v.  Railroad  Co.  (1886)  14  Wkly.  Law  Bui.  68 213c,  2l3e 

Halstead  v.  Dodge,  1  How.  Prac.  (X.  S.)  170,  51  X.  Y.  Super. 

Ot.   169    179 

Hamilton  College  v.  Stewart,  1  X.  Y.  581 50 

Hammond  &  Co.  v.  Hastings,  134  U.  S.  401,  10  Sup.  Ct.  727,  33 

L.    Ed.    960 200 

Handley  v.  Stutz,  139  U.  S.  417,  11  Sup.  Ct  530,  35  L.  Ed.  227 

72c,  87a,  89a,  183 

Harrison  v.  Morton,  83  Md.  456,  35  Atl.  99 126 

Harvey  v.  Improvement  Co.,  24  S.  E.  489,  32  L.  R.  A.  265,  54 

Am.   St.   Rep.   749 213c 

Haskell  v.  Read  (Xeb.)  93  X.  W.  997 96b 

Havemeyer  v.  Hnvemeyer.  43  X.  Y.  Super.  Ct.  506 213b,  213e 

86   X.   Y.  618 213b 

Hawley  v.  Upton,  102  U.  S.  314,  26  L.  Ed.  179 183 

Heald  v.  Owen,  79  Iowa,  23,  44  X.  W.  210 60 

Heath  v.  Smelting  Co.,  39  Wis.  146 87a 

Heck  v.  McEwen,  12  Lea  (Tenn.)  97 60 

Heintzelman  v.  Ass'n,  38  Minn.  138,  36  X.  W.  100 126 

Heminway  v.  Heminway,  58  Conn.  443,  19  Atl.  766 74 

Hepburn  v.  Ellzey,  2  Cranch  (U.  S.)  445,  2  L.  Ed.  332 3Se 

Hey  v.  Dolphin,  92  Hun,  230,  36  X.  Y.  Supp.  627 213b,  213e 

Higert  v.  Trustees,  53  Ind.  326 50 

Hill  v.  Beach,  12  X.  J.  Eq.  31 86,  87 

Hilles  v.  Parrish,  14  X.  J.  Ch.  Rep.  383 72b 

Hoard  v.  Clum.  31  Minn.  186.  17  X.  W.  275 6 

Hodder  v.  Railroad  Co.,  7  Fed.  793 217 

Hodgson  v.  Railroad  Co.,  46  Minn.  454,  49  X.  W.  1!)7 87 

Home  Ins.  Co.  of  Xew  York  v.  Morse,  20  Wall.  (U.  S.)  445,  22 

L.   Ed.   365 14 

CLEPH. Bus. CORP. — b 


xviii  CASES  CITED. 

Sec. 
Hopper  v.  Sage,  112  N.  Y.  530,  20  N.  E.  ?50,  8  Am.  St.  Rep.  771  216 

Houser  v.  Richardson,  90  Mo.  App.  134 216 

Huntington  v.  Bank,  96  U.  S.  388,  24  L.  Ed.  777 38a 

I 

Insurance  Press  v.  Wire  Co.,  70  App.  Div.  50,  74  N.  Y.  Supp. 

1093  115a 

Ireland  v.  Hart,  86  L.  T.  (N.  S.  Eng.  1902)  385 191 

J 

Jarvis  v.  Beach  Co.,  148  N.  Y.  652,  43  N.  E.  68,  31  L.  R.  A.  776, 

51  Am.  St.  Rep.  727 182,  182a 

Johnson  v.  University,  41  Ohio  St.  527 50 

Jones  v.  Brown,  171  Mass.  318,  50  N.  E.  648 213e 

v.  Mining  Co.,  20  Colo.  417,  38  Pac.   700 87,   87e 

v.  Railroad  Co.,  57  N.  Y.  196 216 

67  N.  H.  119,  38  Atl.  120 223,  227 


K 

Kansas  City  Hay  Press  Co.  v.  Devol  (C.  C.)  72  Fed.  717 73 

Kansas  Pac.  R.  Co.  v.  Railroad  Co.,  112  U.  S.  414,  5  Sup.  Ct. 

208,  28  L.  Ed.  794 15 

Kean  v.  Johnson,  9  N.  J.  Eq.  401 60 

Kent  v.  Mining  Co.,  78  N.  Y.  159 GO,  134 

King  v.  Sarria,  69  N.  Y.  24,  25  Am.  Rep.   128 87e 

Kinsley  v.  Encampment  Co.,  41   111.   App.  2o!> 50 

Knox  v.  Eden  Musee  Co.,  148  N.  Y.  441,  42  N.  E.  988,  31  L.  R. 

A.  779,  51  Am.  St.  Rep.  700 200 

Kreissel  v.  Distilling  Co.,  61  N.  J.  Eq.  5,  47  Atl.  471 213c,  213e 

L 

Lafayette  Ins.  Co.  v.  French,  18  How.  (U.  S.)  404,  15  L.  Ed.  451..  14 

Land  Grant  Ry.  &  Trust  Co.  v.  Coffey  County,  6  Kan.  245 68 

v.  Com'rs,  6  Kan.  245 14 

Langan  v.  Francklyn,  29  Abb.  N.  C.  102,  20  N.  Y.  Supp.  404.  .  115a 

Lathrop  v.  Knapp,  27  Wis.  214 50 

Liverpool    &   L.    Life   &   Fire    Ins.   Co.   v.    Massachusetts,    10 

Wall.  (U.  S.)  566,  19  L.  Ed.  1029 87e 

v.  Oliver,  10  Wall.   (U.  S.)  566,   19  L.   Ed.   1029 15 


CASES  CITED.  XIX 

Sec. 
Lloyd  v.  Preston.  146  U.  S.  630,  13  Sup.  Ct.  131,  36  L.  Ed.  1111 

115a,  183 
Loewenthal  v.  Reclaiming  Co.,  52  N.  J.  Eq.  440,  28  Atl.  454.  .60,  77 

Loutsenhizer  v.  Milling  Co.,  5  Colo.  App.  479.  39  Pac.  66 53 

Lowry  v.  Bank,  Taney,  310,  Fed.  Cas.  No.  8,581 195,  196 

M 

McAlester   Mfg.    Co.  v.   Cotton    &    Iron    Co.,    128  Ala.   240,  30 

South.  632    : 46 

McCall  v.  Mfg.  Co.,  6  Conn.  428 72c 

McClure  v.  Wilson,  43  111.  356 50 

Manchester  St.  Ry.  v.  Williams,  71  X.  H.  312,  52  Atl.  461.  ..   50,  94 
Marbury  v.  Ehlen,  72  Md.  206,  19  Atl.  648,  20  Am.  St.  Rep.  467  196 

Martin  v.  Stove  Co.,  78  111.  App.  105 46 

Mason  v.  Mining  Co.,  133  U.  S.  50,  10  Sup.  Ot  224.  33  L.  Ed. 

524 227b 

Meredith  v.  Iron  Co.,  55  N.  J.  Eq.  211,  37  Atl.  539:  56  N.  J. 

Eq.  454,  41  Atl.  1116 224 

Merrick  v.  Van  Santvoord,  34  X.  Y.  208 13,  87e 

Metropolitan  Telephone  &  Telegraph  Co.  v.  Telegraph  &  Tele- 
phone Co.,  44  X.  J.  Eq.  568,  14  Atl.  907 76 

Miller  v.  Ewer.  27  Me.  509,  46  Am.  Dec.  619 22,  35,  87,  87r- 

Mobile  &  O.  R.  Co.  v.  Xicholas,  98  Ala.  92,  12  South.  723 213b 

Montgomery  v.  Forbes,  148  Mass.  249,  19  X.  E.  342 87 

Moores  v.  Bank,  111  U.  S.  156,  4  Sup.  Ct.  345,  28  L.  Ed.  385. ..  182 
Morgan  v.  Struthers,  131  U.  S.  246,  9  Sup.  Ct.  726.  33  L.  Ed.  132 

10,  213e 
Morrill  v.  Mfg.  Co.,  53  Minn.  371,  55  X.  W.  547.  21  L.  R.  A.  174 

87g,   96b 

Moses  v.   Scott,  84  Ala.  608,  4   South.   742 213c,  213e 

Muller  v.  Dows,  94  U.  S.  444,  24  L.  Ed.  207 15 

Mutual  Fire  Ins.  Co.  v.  Farquhar,  86  Md.  668,  39  Atl.  527 227 

N 

Nassau  Bank  v.  Jones,  95  X.  Y.  115,  47  Am.  Rep.  14 46 

Xassau  Phosphate  Co.,  In  re,  2  Ch.  Div.  610 47 

Xemaha  Coal  &  Mining  Co.  v.  Little,  54  Kan.  424.  38  Pac.  483     53 
Xew  York  &  X.  H.  R.  Co.  v.  Schuyler,  34  X.  Y.  30 182 


XX  CASES   CITED. 


0 

Sec. 

O'Brien  v.  Cummings,  13  Mo.  App.  197 57 

Ogilvie  v.  Insurance  Co.,  22  How.  (U.  S.)  380,  16  L.  Ed.  349..   183 
O'Herron  v.  Gray,  168  Mass.  573,  47  N.  E.  429,  40  L.  R.  A.  498, 

60  Am.  St.  Rep.  411 194 

Ohio  Xat.  Bank  of  Washington  v.   Construction   Co.,   17  App. 

D.    C.    524 87a 

Ohio  Wesleyan  Female  College  v.  Higgins,  16  Ohio  St.  20 50 

Ohio  &  M.  R.  Co.  v.  McPherson,  35  Mo.  13,  86  Am.  Dec.  128. .     87a 

v.  State,  49  Ohio  St.  668,  32  N.  E.  933 213c,  213e 

Oregonian  R.  Co.  v.  Navigation  Co.  (C.  C.)  22  Fed.  248 87a 

l'3    Fed.    232 87e 

Oregon  R.  &  Nav.  Co.  v.  Railroad  Co.,  130  U.  S.  1,  9  Sup.  Ct. 

409,  32  L.   Ed.  807 87o 

Ormsby  v.  Copper  Co.,  56  N.  Y.  623 25,  87a 

Overend,  Gurney  &  Co.  v.  Gibbs,  L.  R.  5  Eng.  &  Irish  App.  480    S4a 
Owen  v.  Shepard,  59  Fed.  746,  8  C.  C.  A.  244 86 


P 

Parkhurst  v.  Railroad  Co.,  102  111.  App.  507 50 

Paul  v.  Virginia,  8  Wall.  (U.  S.)  168,  19  L.  Ed.  357 14,  15 

Pembina  Consol.   Silver  Min.  &  Mill  Co.  v.  Pennsylvania,  125 

U.  S.  181,  8  Sup.  Ct.  737,  31  L.  Ed.  650 14,  15 

Pensacola  Telegraph  Co.  v.  Telegraph  Co.,  96  U.  S.  1,  24  L.  Ed. 

708   14 

People  v.  Kip,  4  Cow.  (N.  Y.)  382,  note 108 

v.  Railroad  Co.,  55  Barb.  (N.  Y.)  344 105a 

v.  Roberts,  155  N.  Y.  408,  50  N.  E.  53,  41  L.  R.  A.  228 ....  42 

People's  Mut.  Ins.  Co.  v.  Westcott,  14  Gray  (Mass.)  440 227 

Perry  v.  Oil  Co.,  93  Ala.  364,  9  South.  217 139 

Peruvian  Railways  Co.  v.  M.  I.  Co..  2  Ch.  Div.  G17 84;i 

Philips  v.  Wickham,  1  Paige  (N.  Y.)  590 211 

Phillips  v.  Bridge  Co.,  2  Mete.  (Ky.)  219 47 

Post  v.  Electrical  Co.,  84  Fed.  371,  28  C.  O.  A.  431 2271> 

Presbyterian  Church  of  Albany  v.  Cooper,  112  N.  Y.  517,  2(»  X. 

E.  352,  3  L.  R.  A.  468,  8  Am.  St.  Rep.  767 50 

Princeton  Min.  Co.  v.  Bank,  7  Mont.  530,  19  Pac.  210 49 

Pullman  v.  Upton,  96  U.  S.  328,  24  L.  Ed.  818 183 


CASES   CITED.  XXI 


R 

Sec. 

Ranger  v.  Cotton  Press  Co.  (C.  C.)  51  Fed.  61 74 

Rapid  Transit  Ferry  Co.,   In  re,   15  App.  Div.  530,  44   X.    Y. 

Supp.  539 90,  96b 

Reichwald  v.  Hotel  Co.,  106  111.  439 72c 

Republican  Mountain  Silver  Mines  v.   Brown,  58  Fed.  644,  7 

C.  C.  A.  412,  24  L.  R.  A.  776 58 

Richardson  v.  Graham,  45  W.  Va.  134,  30  S.  E.  92 30,  41b 

Richelieu   Hotel   Co.  v.  Encampment  Co.,   140  111.  248,  29  N. 

E.  1044,  33  Am.  St.  Rep.  234 50 

Rochester  Ins.  Co.  v.  Martin,  13  Minn.  59  (Gil.  54) 60 

Runyan  v.  Coster,  14  Pet.  (U.  S.)  122,  10  L.  Ed.  382 13 

Russell  v.  Post,  138  U.  S.  425,  11  Sup.  Ct  353,  34  L.  Ed.  1009. .    .  227b 


S 

Sanger  v.  Upton,  91  U.  9.  56,  23  L.  Ed.  220 183 

Sanitary  Carbon  Co.,  In  re,  12  Wkly.  Notes.  223 87t? 

Saxon  v.  Barksdale,  4  Desaus.  (S.  C.)  522 194 

Scanlan  v.   Snow,  2  App.   D.  C.  154 212 

Scheffer  v.  Insurance  Co.,  25  Minn.  534 38a 

Schell  v.  Deperven.  198  Pa.  591,  48  Atl.  815 199 

198  Pa.  600,  48  Atl.  813,  82  Am.  St.  Rep.  820 199 

Schwarzwalder  v.  Tegen,  58  N.  J.  Eq.  319,  326,  43  Atl.  587...   203 
Scott  v.  McXeal,  154  U.  S.  34,  14  Sup.  Ct.  1108,  38  L.  Ed.  896. .  197 

Scovill  v.  Thayer,  105  U.  S.  143,  26  L.  Ed.  908 183 

Seymour  v.  Sturgess,  26  N.  Y.  134 10 

Sharpe  v.  Dawes,  2  Q.  B.   D.  26 87g 

Shepaug  Voting  Trust  Cases,  60  Conn.  553,  24  Atl.  32.  .36a,  38,  213e 
Smith  v.  Mining  Co.,  64  Md.  85,  20  Atl.  1032,  54  Am.  Rep.  760 

87,  87b,  87f 
v.  Railroad  Co.,  115  Cal.  584,  47  Pac.  582,  35  L.  R.  A.  309. 

r.ti  Am.   St.   Rep.  119 213b,   213e 

8  Ohio  Cir.  Ct.   R.  583 46 

91  Tenn.  221,  18  S.   W.  546 '. 192 

v.  Smith,  3  Desaus.  (S.  C.)  557 211,  227 

v.  Steamboat   Co.,    1    How.    (Miss.)   479 126 

South  Bend  First  Nat.  Bank  v.  Lanier,  11  Wall.  (U.  S.)  369,  20 

L.    Ed.    172 201 

Southern  Bank  v.  Williams,  25  Ga.   534 87a 


XX11  CASES  CITED. 

Sec. 
Southern  Pac.   Co.   v.  Denton,  146  U.   S.  202.   13   Sup.   Ct.  44, 

36  L.    Ed.   377 14 

Spring  Garden  Bank  v.  Lumber  Co.,  32  \V.  Va.  357,  9  S.   E. 

243,  3  L.  K.  A.  r>83 30,  41b 

Staples  v.  Materials  Co.,  2  Ch.   Div.   303 175 

Starbuck  v.  Trust  Co.,  60  Conn.  576,  24  Atl.  32 213c 

State  v.  Land  Co.  (Wash.)  52  Pac.  574.  40  L.  R.  A.  430 49 

v.  McGrath,  92  Mo.  355,  5  S.  W.  29 62 

v.  Merchant,  37  Ohio  St  251 105a 

v.  Oil  Co.,  49  Ohio  St.  147,  30  N.  E.  279,  15  L.  R.  A.  14o,  34 

Am.   St.  Rep.  541 213c 

v.  Redemption  Co.,  51  La.  Ann.  1827,  26  South.  586 115a 

v.  Rohiffs  (N.  J.)  19  Atl.  1099 212 

v.  Stockley,  45  Ohio  St.  304,  13  N.   E.  279 210 

State  ex  inf.  Attorney  General  v.  Hogan.  163  Mo.  43,  63  S.  W. 

378    115a 

State  ex  rel.  O'Hara  v.  Biscuit  Co.,  69  N.  J.  Law,  198,  54  Atl. 

241    74 

State  ex  del.  Schroeder  v.  Perkins.  90  Mo.  App.  603 139 

State,  to  Use  of  Gable,  v.  Cheston,  51  Md.  352,  373 195 

Stebbins  v.  Merritt,  10  Gush.  (Mass.)  27 105a 

Stewart  v.  Insurance  Co.,  53  Md.  564 196 

Supply  Ditch  Co.  v.  Elliott,  10  Colo.  327,  15  Pac.  691,  3  Am. 

St.   Rep.  586 201 

Swartout  v.  Railroad  Co.,  24  Mich!  389 60 


T 

Taylor  v.  Griswold,  14  N.  J.  Law,  222,  27  Am.  Dec.  33 211 

Terry  v.  Little,  101  U.  S.  216,  25  L.  Ed.  864 10 

Thomas  v.  Railroad  Co.,  101  U.  S.  71,  25  L.  Ed.  950 59,  64 

Thorington  v.  -Gould,  59  Ala.  461 218 

Titus  v.  Railroad  Co.,  37  N.  J.  Law,  98 41b 

Trustees  of  Troy  Conference  Academy  v.  Nelson,  24  Vt.  189 . .     50 
Twenty-Third   St.   Baptist  Church  v.   Cornell,  117  N.   Y.    601, 
23  N.  E.  177,  6  L.  R.  A.  807 50 


CASES  CITED.  XX111 


u 

Sec. 

Union  Bank  of  Louisiana  v.  Guice,  2  La.  Ann.  249 60 

Upton  v.  Tribilcock,  91  U.  S.  45,  23  L.  Ed.  203 183 


V 

Van  Cott  v.  Van  Brunt,  82  N.  Y.  535 183 

Vaiiderbilt  v.  Bennett,  6  Pa.  Co.  Ct.  R.  193 213e 

(1887)  6  Pa.  Co.  Ct  R.  193,  2  Ry.  &  Corp.  Law  J.  409 213c 


w 

Walker   v.    Lewis,    49    Tex.    123 10 

Warren  v.  Pirn  (N.  J.)  55  Atl.  66 213c,  213e 

Washburu  v.  Green,  133  U.  S.  30,  10  Sup.  Ct.  280,  33  L.   Ed. 

516   183 

Waters-Pierce  Co.  v.  Texas,  177  U.  S.  28,  20  Sup.  Ct.  518,  44  L. 

Ed.  657  14 

Way  v.  Grease  Co.,  60  N.  J.  263,  47  Atl.  44 224 

Weatherly  v.  Society,  76  Ala.  567 60 

Webb  v.  Mfg.  Co.,  11  S.  C.  396,  32  Am.  Rep.  479 194 

Webster  v.  Upton,  91  U.  S.  65,  23  L.  Ed.  384 183 

Wells  v.  Rubber  Co..  19  N.  J.  Eq.  402 142 

Western  Union  Telegraph  Co.  v.  Davenport,  97  U.   S.  369.  .24 

L.   Ed.  1047 191,   200 

v.  Texas,  105  U.  S.  460,  26  L.  Ed.  1067 14 

Weyer  v.  Bank,  57  Ind.  198 194 

White  v.  Tire  Co.,  52  N.  J.  Eq.  178.  28  Atl.  75 09.  213c,  213e 

White  Chimney  &  S.  C.  Turnpike  Road  Co.  v.  McMahan  (Ky.) 

50  S.  WT.  836 126 

Whiting's  Estate,  In  re,  150  N.  Y.  27,  44  N.  E.  715,  34  L.  R.  A. 

232,  55  Am.  St  Rep.  640 25,  42 

Whitsitt   v.   Trustees,    110   111.   125 50 

Willcocks,  Ex  parte,  7  Cow.  402,  17  Am.  Dec.  525 105n 

Williams  v.  Creswell,  51  Miss.  817 38n 

v.  Hewitt.  47  La.   Ann.   1076,  17   Smith.   496,  49   Am.    St. 

Rep.  394  86 

v.  Montgomery,  148  N.  Y.  519.  43  N.  E.  57 213b 

Windram  v.  French,  151  Mass.  547,  24  N.  E.  914,  8  L.  R.  A.  750  182a 


XXv  CASES    CITED. 

Sec. 

Witters  v.  Sowles  (C.  C.)  38  Fed.  700 48 

Wood,  Appeal  of.  92  Pa.  379,  37  Am.  Rep.  694 199 

Woodruff  v.  Railroad  Co.  (C.  C.)  30  Fed.  91 213c,  213e 


Y 

Yeaton  v.  Lynn.  5  Pet.  (U.  S.)  224,  229,  8  L.  Ed.  103 195 

z 

Xiegler  v.  Railroad  Co.  (C.  C.)  G9  Fed.  176 213b 


TABLE  OF  STATUTES  CITED. 

[THE  FIGURES  AFTER  THE  DASH  KEFER  TO  THE  SECTIONS  OF  THE  TEXT.] 


CONNECTICUT: 

General  Statutes,  §  2368 24. 

Corporation  Law,  ch.  194,  §§  2,  5,  10,  11,  12.  18.  22.  37,  61,  63, 
69 24,  63. 

DELAWARE : 

Laws,  vol.  13,  ch.  390,  §  12 27,  41,  41c. 

Franchise  Tax  Act,  §§  2,  4 27,  41a. 

Corporation  Law,  §§  5,  9,  12,  14,  29,  32,  129,  135 27,  41,  41  a,  63, 

72,  75. 

DISTRICT  OF  COLUMBIA : 

United  States  Statutes  at  Large,  vol.  32,  p.  617 28. 

vol.  33,  p.  564 28. 

Code,  §§  608.  612,  613,  617,  618,  619,  620,  621,  622,  627,  628 28, 

38c,  38d,  75. 
IOWA : 

Code,  §  2889 49. 

MAINE : 

Pamphlet  Laws  1893,  ch.  146,  as  amended 22,  35b. 

Revised  Statutes  1904,  ch.  8.  §  18 22. 

"      ch.  47.  §§  7,  8,  19,  20,  26,  32,   r,0.   51 

22,  72. 
MASSACHUSETTS : 

Revised  Laws  1902,  ch.  15 23,  35b. 

Corporation  Laws,  ch.  110,  §  79 23. 

Business  Corporation  Law  of  1903,  ch.  437.  §§  4.  8.  11,  14,  17, 
18.  20,  2o,  30,  34,  35,  45,  72,  74,  88 23,  35,  35c,  72. 

MISSOURI: 

Revised  Statutes,  §  4765 49. 

NEVADA : 

General  Incorporation  Law  of  1903.  §§  4.  11.  12.  13.  14.  20.  23,  28, 

34,  42.  54,  58,  68,  71,  73,  76,  77,  85,  102,  106,  110,  111 32,  63, 

72.  73. 

CLEPII. Bus. CORP.  (xxv) 


XiVl  STATUTES   CITED. 

[The  figures  after  the  dash  refer  to  the  sections  of  the  text.] 
NEW  JERSEY : 

Pamphlet  Laws  1894,  p.  318 26,  41,  42. 

"       1900,  p.  418 26,   41,   70. 

"      1901,  p.  31 26,  41a,  41b.  42. 

Corporation  Act,  §§  8,  11.  12,  13,  29.  30/33,  35.  43,  44,  45.  48.  49, 
51,  55,  92,  95,  114 26,  41,  41  a,  41b,  72,  75,  87e,  105a,  126. 

NEW  YORK: 

Laws  of  1896,  ch.  908,  §  180 25. 

"    1901,  ch.  448 25. 

"    1904,  ch.  446,  §  2 25,  72. 

Tax  Laws,  §§  27,  181,  182,  183,  189,  190 25.  42. 

Penal  Code,  §§  594  to  612 25. 

General  Corporation  Law.  §§  4,  20,  2(3.  29 25,  70.  112,  213b. 

Business  Corporation  Law,  §§  2,  3.  5 25. 

Stock  Corporation  Law.  §§  20.  23.  29,  30.  31.  40,  42,  48 25,  42. 

Incorporation  Law  of  1901.  ch.  355 69,  213b. 

PENNSYLVANIA : 

Act  of  May  7,  1889 69,  213b. 

PORTO  RICO : 

Civil  Code,  tit.  2,  ch.  1,  §§  36(5).  38.  39.  40.  41.  42n.  45.  40.  47,  48, 

49,  52,  61,  62,  63 33,  35,  72,  75,  105a. 

Revised  Statutes  &  Codes,  p.  455,  §  368 33. 

SOUTH  DAKOTA : 

Constitution,  art.  17,  §§  5,  8 31. 

Laws  1903,  ch.  141 31. 

Revised  Civil  Code  1903,  §§  410,  430,  434,  436,  437,  445,  449,  780, 
784,  786,  787 20,  31,  37,  37a,  72. 

VIRGINIA : 

General  Incorporation  Act.  ch.  1,  §§  2.  13,  14 29.  63. 

"     ch.  5.   §§   2h.   5.  7.  9,   10,  19.   20.   •*>. 

:!!>.  00 29,  35,  72. 

Tax  Law  1903,  §§  38,  41,  43,  44 29. 

WASHINGTON  : 

Constitution,  art.  2,  §  23 49. 

WEST  VIRGINIA : 

Code,  ch.  32,  §§  51a  (I),  87.  88,  89 30,  41b.  41  c.  7Sa. 

"       ch.  52,  §  3 30. 

ch.  53,  §§  40,  44,  40.  49.  51 30,  41  b.  73. 

"       ch.  54,  §§  2,  7,  11,  23 20.  30,  41b,  72. 

WISCONSIN : 

K<-visod  Statutes  1898.  §  2200a 49. 


THE    ORGANIZATION 

AND 

MANAGEMENT   OF    BUSINESS 
CORPORATIONS. 


INTRODUCTION. 

1.  Individual  Business. 

2.  Partnership  Business. 

3.  Corporate  Business. 

5.  Legal  Incidents  of  Partnerships. 

8.  Reasons  for  Incorporating. 

9.  Origin  and  Growth  of  Corporations. 

10.  Legal  Incidents  of  Corporations. 

11.  Relations  between  Corporations  and  the  State. 

13.  Choosing  a  Domicile. 

14.  Interstate  Comity. 

15.  Citizenship  of  Corporations. 


§  1.     Individual  business. 

In  primitive  days,  prior  to  the  opening  up  of  the  avenues  of 
trade  and  commerce,  when  the  business  interests  of  the  indi- 
vidual were  centered  around  the  community  in  which  he  lived, 
there  was  little  need  for  the  employment  of  a  large  amount  of 
capital  in  any  given  undertaking.  The  individual  then  stood 
for  himself,  and  was  easily  able  to  handle,  with  his  limited  re- 
sources, all  the  business  coming  to  his  hands. 

CLEPH.BUS.COBP. — 1  (1) 


§  2  BUSINESS   CORPORATIONS. 

§  3.     Partnership  Business. 

But  when  the  opportunities  arising  from  communication  with 
other  neighborhoods  were  once  grasped  by  mankind  it  became 
speedily  apparent  that,  unless  possessed  of  unusual  wealth,  no 
one  man,  or  possibly  two  men,  could  raise  and  utilize  sufficient 
capital  to  enable  them  to  prosecute  successfully  any  species 
of  trade  or  industry  of  a  larger  magnitude  than  that  of  the 
small  tradesman.  Hence  copartnerships  sprang  into  exist- 
ence, and  became  the  forerunners  of  the  great  commercial 
houses  so  characteristic  of  the  business  world  a  few  years  ago. 

§  3.     Corporate  Business. 

In  modern  times  the  partnership  is  rapidly  becoming  a  thing 
of  the  past.  The  field  of  the  wideawake  business  man  is  no 
more  contracted  than  the  world  itself.  The  distant  corners  of 
the  earth  constitute  his  market  just  as  truly  as  if  the  space 
which  intervenes  between  him  and  them  had  been  obliterated. 
By  means  of  the  telegraph  and  cable  he  is  immediately  ap- 
prised of  the  needs  of  the  inhabitants  of  South  Africa  and  of 
the  islands  of  the  sea,  and  must  be  prepared  to  meet  the  de- 
mands of  these  people,  as  well  as  of  the  denizens  of  those 
regions  nearer  home,  without  delay.  This  necessitates  the  em- 
ployment of  a  larger  capital  than  was  ever  dreamed  of  in  the 
early  days  of  the  business  world.  Instead  of  a  combination  of 
two  or  three  individuals,  dozens  or  hundreds  or  thousands  of 
persons  must  unite  their  capital  in  a  commercial  enterprise. 

§  4.  When  this  stage  of  business  development  was  reached, 
the  futility  of  partnerships  was  quickly  discovered. 

§  5.     Legal  Incidents  of  Partnerships. 

Among  the  legal  incidents  of  partnerships  is  the  principle 
that  each  partner  is  bound  by  the  acts  of  every  other  member 
of  the  firm  within  the  scope  of  the  partnership  business.1  Not 

i  T.  Pars.  Partn.  §§  108,  114,  115 ;    Story,  1'artn.  §§  101,  102,  12G ;    1 
Lindl.  Partn.  p.  *124. 
(2) 


INTRODUCTION.  §  7 

only  is  he  liable  to  the  extent  of  his  proportionate  part  of  the 
capital  invested  in  the  enterprise,  but  personally  for  the  entire 
indebtedness  contracted  by  any  one  of  his  associates  on  ac- 
count of  the  joint  undertaking.2  Among  a  large  number  of 
persons  there  is  almost  sure  to  be  at  least  one  who  would  de- 
velop dishonest  traits  or  prove  unwise,  and  whose  actions 
would  involve  all  the  members  in  unfortunate  complications. 
So  that  it  would  be  a  hazardous  thing  for  any  one  to  become 
enwrapped  in  such  an  entanglement  and  expose  himself  and 
his  family  to  the  loss  of  all  that  which  by  his  own  industry  or  the 
efforts  of  others  before  him  had  been  accumulated  for  the  sup- 
port of  his  declining  years. 

§  6.  Another  principle  of  partnership  law  is  that  upon  the 
death  of  one  of  the  members  of  the  firm  the  firm  is  eo  instante 
dissolved.8  Not  only  are  the  relations  of  the  survivors  with  the 
deceased  terminated,  but  so,  also,  are  the  relations  of  the 
survivors  amongst  themselves.4  The  business  must  be  immedi- 
ately wound  up,  and  a  settlement  made  with  the  estate  of  the 
deceased  member.5  Into  a  company  of  many  persons  death 
must  frequently  come.  The  results  of  this  doctrine  of  the  legal 
dissolution  of  the  firm  upon  death,  therefore,  are  embarrassing 
in  the  extreme. 

§  7.  Again,  if  one  of  the  associates  in  a  copartnership  de- 
sires at  any  time  to  part  with  his  interest  in  the  firm,  he  must 
either  sell  to  one  of  his  copartners,  or  else  find  a  purchaser 
whom  it  is  agreeable  to  his  copartners  to  have  associated  with 
them.  He  cannot  sell  to  a  stranger,  and  give  that  stranger  a 
right  to  become  a  member  of  the  firm,  without  the  consent 

2  T.  Pars.  Partn.  §§  249,  253 ;    Story,  Partn.  §  2GO ;    1  Lindl.  Partn. 
p.  *200. 

3  T.  Pars.  Partn.  §§  342,  343 ;    Story,  Partn.  §  317 ;    2  Lindl.  Partn. 
p.  *590. 

<  Hoard  v.  Clum,  31  Minn.  186,  17  N.  W.  275 ;  Story,  Partn.  §  317 ; 
2  Lindl.  Partn.  p.  *590. 

s  T.  Pars.  Partn.  §  344  et  seq. ;  Story,  Partn.  §§  344,  347 ;  2  Lindl. 
Partn.  p.  *591,  and  notes. 

(3) 


§  8  BUSINESS    CORPORATIONS. 

of  the  other  parties  interested.6  This  necessarily  restricts  the 
field  of  negotiations,  and  so  tends  to  reduce  the  purchase  price 
of  the  interest  offered.  For  the  same  reason  it  is  difficult  to 
borrow  money  upon  the  security  of  an  undivided  interest  in 
a  partnership  business.  Even  if  a  sale  is  effected,  the  with- 
drawing member  is  not  thereby  released  from  liability  for  the 
partnership  indebtedness,  but  continues  liable  not  only  for  the 
debts  contracted  up  to  the  time  of  his  withdrawal,  but  also  for 
all  debts  subsequently  contracted  in  favor  of  those  creditors  not 
.informed  of  his  retirement.7 

§  8.     Reasons  for  Incorporating. 

These  reasons,  with  others  which  it  is  hardly  necessary  to 
elaborate,  have  caused  our  business  men  to  discard  partnerships, 
and  to  seek  some  other  legal  basis  upon  which  they  can  rest 
their  rights  and  by  which  they  can  measure  their  liabilities. 
While  the  reasons  advanced  apply  with  peculiar  force  to  large 
combinations  of  capital  comprising  many  individuals,  the  same 
principles  prevail  with  a  greater  or  less  degree  of  inconvenience 
in  smaller  aggregations  of  capital. 

§  9.     Origin  and  Growth  of  Corporations. 

Among  the  Romans  the  corporation  was  a  well-known  insti- 
tution.8 The  corporate  conception  was  early  adopted  by  the 
common  law  in  England,  and  tradesmen  were  permitted,  with 
the  king's  consent,  to  organize  themselves  into  corporations. 
Though  the  fundamental  principles  governing  this  class  of 
artificial  entities  have  been  well  understood  for  many  centuries, 
still  we  find  that  comparatively  few  business  corporations 
existed  until  very  modern  times,  when  business  men  discovered 
in  these  artificial  creations  exactly  what  was  needed  to  give 
them  the  protection  required  for  the  conduct  of  large  affairs.9 

«  T.  Pars.  Partn.  §  112 ;   1  Lindl.  Partn.  p.  *363. 
T  Story,  Partn.  §§  158,  161 ;    T.  Pars.  Partn.  §§  313,  315 ;    1  Lindl. 
Partn.  pp.  *210,  *213. 

«  Tayl.  Priv.  Corp.  cc.  1,  2 ;   1  Bl.  Comm.  p.  *4G9. 
»  1  Cook,  Corp.  §  7. 
(4) 


INTRODUCTION.  §  11 

§  10.     Legal  Incidents  of  Corporations. 

A  corporation  has  the  right  to  make  by-laws  prescribing  and 
limiting  the  powers  of  its  officers  and  agents ; 10  those  compos- 
ing the  corporation  were  not  at  common  law  individually  liable 
for  the  debts  of  the  concern;11  the  corporate  existence  was 
perpetual,  and  the  death  of  a  member  did  not  legally  affect  it ; 12 
and  shares  of  stock  could  be  issued  representing  the  interest  of 
each  member,  which  shares  could  be  bought  and  sold  in  the 
open  market,  with  the  right  in  the  purchaser  to  take  the  place 
of  his  vendor  in  the  corporation  irrespective  of  the  wishes  of 
the  other  stockholders.18  In  consequence  of  these  incidents  the 
present  tendency  among  business  men  is  to  incorporate  rather 
than  subject  themselves  to  the  dangers  surrounding  business 
conducted  under  the  guise  of  a  partnership. 

§  11.     Relations  between  Corporations  and  the  State. 

A  better  understanding  of  the  nature  of  the  corporate  fran- 
chise may  perhaps  be  gained  by  a  brief  reference  to  the  theories 
at  different  times  underlying  the  relations  between  the  corpora- 
tion and  the  state  creating  it.  Under  the  old  idea  it  was  con- 
sidered that  corporations,  being  creatures  of  the  state,  should 
be  guarantied  by  it  to  the  public  in  all  particulars  of  responsi- 
bility and  management.  It  was  required  that  the  capital  stock 
(which  was  the  fund  to  which  creditors  must  look  for  the  satis- 
faction of  their  demands)  should  be  paid  up  to  its  full  value 
in  actual  cash,  and  that  the  debts  should  not  exceed  the  amount 
of  its  capital.  Hence  such  intangible  assets  as  good  will,  trade- 
marks, patents,  and  franchises  generally  could  not  be  consid- 
ered in  making  up  the  capital  of  a  company.  Creditors  and 

10  1  Bl.  Comm.  pp.  *475,  *476;   Cook,  Corp.  §  4a. 

11  Tayl.   Priv.  Corp.  §  700;     Seymour  v.   Sturgess,  26  N.  Y.   134: 
Walker  v.  Lewis,  49  Tex.  123 ;    1  Clark  &  M.  Corp.  §§  16,  20 ;   Terry 
v.  Little,  101  U.  S.  216,  25  L.  Ed.  864. 

121  Bl.  Comm.  pp.  *46S,  *47.~>. 

is  1  Cook.  Corp-  §§  7,  8;  1  Clark  &  M.  Corp.  §§  16,  20;  Morgan  v. 
Struthers,  131  U.  S.  240.  9  Sup.  Ct.  726,  33  L.  Ed.  132. 

(5) 


§  lla  BUSINESS    CORPORATIONS. 

stockholders  were  protected  by  the  state  with  almost  the 
same  degree  of  solicitude  as  if  they  were  persons  non  compos 
or  minors. 

§  lla.  The  more  progressive  states,  finding  that  this  pol- 
icy was  not  adapted  to  modern  business  conditions,  began  to 
incline  to  the  opposite  extreme.  Charters  were  granted  which 
enabled  corporations  to  do  anything  that  an  individual  could 
do  and  in  any  manner,  leaving  the  stockholders  and  creditors 
to  protect  their  own  interests.  Such  persons,  voluntarily  choos- 
ing to  deal  with  corporations  whose  rights  and  liabilities  were 
definitely  prescribed  in  the  law  creating  them,  were  left  to 
their  own  good  sense  and  business  judgment  to  safeguard  their 
rights,  without  any  effort  upon  the  part  of  the  state  to  aid 
them.1* 

§  lib.  But  when  matters  had  gone  to  this  extreme,  the 
ease  with  which  corporate  affairs  could  be  manipulated  by 
evilly  disposed  managers  to  the  prejudice  of  stockholders  and 
creditors  resulted  in  scandals  of  such  magnitude  and  disastrous 
effects  that  within  the  past  two  or  three  years  the  effort  of  the 
states  which  have  amended  their  corporation  laws  along  the 
more  liberal  lines  has  been  to  adopt  so  much  of  the  modern 
theories,  and  only  so  much,  as  is  consistent  with  safety  to  the 
public. 

§  12.  As  an  illustration  of  the  most  recent  thought  upon 
this  subject,  the  report  of  the  committee  appointed  by  the  state 
of  Massachusetts  to  revise  its  corporation  laws,  transmitted  to 
the  Senate  and  House  of  Representatives  of  that  common- 
wealth, January  14,  1903,  is  instructive.  That  committee 
(whose  recommendations  were  subsequently  adopted  by  the 
State  Legislature)  submitted  a  plan  permitting  the  greatest 
possible  latitude  to  business  corporations  in  order  to  effect  their 
purposes,  provided  that  stockholders  and  creditors  should  at 

14  Report  of  Committee  on  Corporation  Laws,  Commonwealth  of 
Massachusetts  (1903)  pp.  20--'8. 

(6) 


INTRODUCTION.  §  14: 

all    times   be   precisely    informed   of   all    the    facts   attending 
both  the  organization  and  management  of  such  corporations.16 

§  13.     Choosing  a  Domicile. 

The  first  and  most  natural  thought  in  the  minds  of  those 
intending  to  incorporate  a  given  company  is  to  ascertain  what 
the  laws  of  the  particular  state  in  which  the  business  is  to  be 
carried  on  provide.  Other  things  being  equal,  it  is  generally 
considered  better  policy  to  organize  under  the  domestic  laws. 
But  a  perusal  of  these  laws  will  frequently  disclose  the  fact 
that  they  are  not  well  adapted  to  the  most  efficient  administra- 
tion of  the  business  in  hand.  This  was  the  difficulty  encoun- 
tered by  those  desirous  of  incorporating  in  the  state  of  Massa- 
chusetts prior  to  the  revision  of  its  corporation  laws  in  the 
year  1903.  The  consequence  is  that  incorporators  are  often 
driven  to  avail  themselves  of  the  laws  of  some  other  juris- 
diction which  are  more  favorable  for  their  particular  project. 
By  a  principle  of  state  comity  a  corporation  organized  in  one 
state  will  be  permitted  to  do  business  in  another,  where  the  na- 
ture of  the  corporate  powers  conferred  and  exercised  is  not 
contrary  to  the  public  policy  of  the  latter  state  as  indicated  by 
its  statutes  and  decisions.1' 

§  14.     Interstate  Comity. 

It  is  quite  competent,  however,  for  the  state  to  permit  a  for- 
eign corporation  to  do  business  within  its  limits  only  under  such 
restrictions  and  limitations,  not  conflicting  with  interstate  com- 
merce or  with  the  federal  Constitution,  as  it  may  see  fit  to 

is  Id. 

is  Bank  of  Augusta  v.  Earle,  13  Pet.  (U.  S.)  521,  10  L.  Ed.  274; 
Runyan  v.  Coster,  14  Pet.  (U.  S.)  122,  10  L.  Ed.  382 ;  Cowell  v.  Springs 
Co.,  100  U.  S.  55,  25  L.  Ed.  547;  American  &  Foreign  Christian 
Union  v.  Yount,  101  U.  S.  352,  25  L.  Ed.  888 ;  Merrick  v.  Van  Sant- 
voord,  34  N.  Y.  208 :  Deuiarest  v.  Flack,  128  N.  Y.  205,  28  N.  E.  645, 
13  L.  R.  A.  854 ;  Carroll  v.  East  St  Louis,  67  111.  568,  16  Am.  Rep. 
632. 

(7) 


§  15  BUSINESS    CORPORATIONS. 

impose,  or  even  to  forbid  the  privilege  altogether.11  But  the 
different  states  of  this  Union  have  not  gone  to  the  extent  of  ab- 
solutely declining  to  permit  corporations  organized  elsewhere 
to  do  business  within  their  borders.  The  general  practice  is 
to  grant  this  privilege  to  any  foreign  corporation  upon  its  filing 
a  certified  copy  of  its  charter,  paying  a  license  fee,  and  ap- 
pointing a  resident  agent  upon  whom  legal  process  may  be 
served.18  Where,  however,  a  corporation  is  chartered  in  one 
state,  and  authorized  to  do  business  anywhere  else  except  in 
that  state,  its  corporate  existence  would  not  be  upheld  in  an- 
other jurisdiction.  As  was  said  by  the  court  in  Land  Grant  Ry. 
&  Trust  Co.  v.  Board  of  Com'rs  of  Coffey  County,  6  Kan.  245 : 
"No  rule  of  comity  will  allow  one  state  to  spawn  corporations, 
and  send  them  forth  into  other  states  to  be  nurtured  and  do 
business  there,  when  said  first-mentioned  state  will  not  allow 
them  to  do  business  within  its  own  boundaries." 

§  15.     Citizenship  of  Corporations. 

While,  without  regard  to  its  place  of  doing  business  or  the 
residence  of  its  stockholders,  a  corporation  is  a  citizen  of  the 
state  creating  it  for  the  purpose  of  giving  jurisdiction  to  a 
federal  court  of  a  suit  by  or  against  it,  under  section  2  of  ar- 

"  Lafayette  Ins.  Co.  v.  French,  18  How.  (U.  S.)  404,  15  L.  Ed.  451 ; 
Doyle  v.  Insurance  Co.,  94  U.  S.  535,  24  L.  Ed.  148;  Pensacola  Tele- 
graph Co.  v.  Telegraph  Co.,  96  U.  S.  1,  24  L.  Ed.  708 ;  Western  Union 
Telegraph  Co.  v.  Texas,  105  U.  S.  460,  26  L.  Ed.  1067 ;  Waters-Pierce 
Co.  v.  Texas,  177  U.  S.  28,  20  Sup.  Ct  518,  44  L.  Ed.  657 ;  Cable  v. 
Insurance  Co.,  191  U.  S.  288,  24  Sup.  Ct.  74,  48  L.  Ed.  188 ;  Floyd  v. 
Loan  &  Investment  Co.,  49  W.  Va.  327,  38  S.  E.  653,  54  L.  R.  A.  536, 
87  Am.  St  Rep.  805. 

i«  Paul  v.  Virginia,  8  Wall.  (U.  S.)  168,  19  L.  Ed.  357;  Ducat  v. 
Chicago,  10  Wall.  (U.  S.)  410,  19  L.  Ed.  972 ;  Home  Ins.  Co.  of  New 
York  v.  Morse,  20  Wall.  "(U.  S.)  445,  22  L.  Ed.  365 ;  Pembina  Consol. 
Silver  Min.  &  Mill.  Co.  v.  Pennsylvania,  125  U.  S.  181,  8  Sup.  Ct. 
737,  31  L.  Ed.  650;  Southern  Pac.  Co.  v.  Denton,  146  U.  S.  202,  13 
Sup.  Ct.  44,  36  L.  Ed.  377 :  Chattanooga  Nat.  Building  &  Loan  Ass'n 
v.  Denson,  189  U.  S.  408,  23  Sup.  Ct  630,  47  L.  Ed.  870. 
(8) 


INTRODUCTION.  §  15 

ticle  3  of  the  Constitution  of  the  United  States,19  it  is  not  a  citi- 
zen, within  the  meaning  of  section  2  of  article  4  of  the  Consti- 
tution, which  provides  that  "the  citizens  of  each  state  shall 
be  entitled  to  all  privileges  and  immunities  of  citizens  in  the 
several  states" ;  and  this  section  of  the  Constitution  cannot 
be  invoked  in  aid  of  the  contention  that  a  foreign  corporation 
cannot  be  prevented  from  doing  business  in  another  state.20 

i»  City  of  St.  Louis  v.  Ferry  Co.,  11  Wall.  (U.  S.)  423,  20  L.  Ed. 
192 ;  Chicago  &  N.  W.  R.  Co.  v.  Whitton,  13  Wall.  (U.  S.)  270,  20  L. 
Ed.  571 ;  Muller  v.  Dows,  94  U.  S.  444,  24  L.  Ed.  207 ;  Kansas  Pac. 
R.  Co.  v.  Railroad  Co.,  112  U.  S.  414,  5  Sup.  Ct.  208,  28  L.  Ed.  794. 

20  Paul  v.  Virginia,  8  Wall.  (U.  S.)  168,  19  L.  Ed.  357;  Ducat  v. 
City  of  Chicago,  10  Wall.  (U.  S.)  410,  19  L.  Ed.  972;  Liverpool  & 
London  Life  &  Fire  Ins.  Co.  v.  Oliver,  10  Wall.  (U.  S.)  566,  19  L.  Ed. 
1029:  Pembina  Consol.  Silver  Min.  &  Mill.  Co.  v.  Pennsylvania,  125 
U.  S.  181,  8  Sup.  Ct.  737,  31  L.  Ed.  650. 

(9) 


§  16  BUSINESS    CORPORATIONS.  (Ch.  1 

CHAPTER  I. 

SELECTION  OF  A  DOMICILE. 

§16.  Considerations  Governing  Domicile. 

IS.  The  Corporation  Proposed. 

20.  Life  of  Corporations  and  Stockholders'  Liability. 

21.  Digest  of  Laws  of 

22.  Maine. 

23.  Massachusetts. 

24.  Connecticut 

25.  New  York. 

26.  New  Jersey. 

27.  Delaware. 

28.  District  of  Columbia. 

29.  Virginia. 

30.  West  Virginia. 

31.  South  Dakota. 

32.  Nevada. 

33.  Porto  Rico. 

34.  Analysis  of  Laws  of 

35.  Maine.  Massachusetts,  Virginia,  and  Porto  Rico. 

36.  Connecticut. 

37.  South  Dakota. 

38.  District  of  Columbia. 

39.  Nevada. 

40.  New  York,  New  Jersey,  Delaware,  and  West  Yirsrinia. 

41.  Delaware  and  New  Jersey. 
41b.  West  Virginia  and  New  Jersey. 

42.  New  York  and  New  Jersey. 

§  16.     Considerations  Governing  Domicile. 

It  being  well  settled  that  a  corporation  may  be  organized  under 
the  laws  of  any  state,  irrespective  of  its  actual  business  habitat 
or  the  place  of  domicile  of  its  incorporators,1  it  becomes  the 
first  duty  of  the  corporation  counsel  to  determine  what  laws 
will  be  most  favorable  to  the  efficient  and  economical  manage- 

i  Supra,  §   1.-',.  and  note. 
(10) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  17 

ment  of  any  contemplated  enterprise.  In  arriving  at  his  conclu- 
sion he  will  endeavor  to  obtain  for  his  clients  the  maximum 
of  benefit  with  the  minimum  of  liability  and  expense.  This 
involves  the  consideration  of  many  matters,  the  most  im- 
portant of  which  will  be  here  enumerated,  to  wit : 

1.  The  objects  for  which  corporations  may  be  organized. 

2.  The  corporate  powers  conferred  and  the  nature  of  their 
exercise. 

3.  The  amount  of  capital  permitted ;  when  and  how  paid  in. 

4.  Personal  liability  of  stockholders  and  directors. 

5.  Taxation ;  initial  and  annual. 

6.  Number,  residence,  and  qualifications  of  directors. 

7.  Nature  and  extent  of  annual  reports  required. 

8.  What  books  and  records  must  be  kept  in  the  parent  state. 

9.  Duration  of  corporation. 

10.  Miscellaneous  statutory  provisions. 

§  17.  In  many  states  the  corporation  laws  were  framed 
many  years  ago,  and  have  not  been  considered  by  lawyers  and 
well-informed  laymen  as  particularly  adapted  to  the  demands 
of  modern  business.  In  others,  however,  a  disposition  has 
been  manifested  to  hold  out  such  strong  inducements  to  in- 
tending incorporators  as  to  result  in  a  very  close  competition 
for  the  fees  and  taxes  accruing  from  conferring  the  corporate 
privilege.  In  those  states  the  provisions  are  so  much  more 
liberal  than  in  the  more  conservative  commonwealths  that  the 
attention  of  the  corporation  counsel  may  well  be  confined  to 
the  following  jurisdictions  when  selecting  a  domicile  for  his 
proposed  company,  viz. :  Maine,  Massachusetts,  Connecticut, 
New  York,  New  Jersey,  Delaware,  District  of  Columbia,  Vir- 
ginia, West  Virginia,  South  Dakota,  Nevada,  and  Porto  Rico. 
The  states  are  changing  their  corporation  laws  so  rapidly  that 
the  foregoing  list  of  eligibles  is  considerably  longer  than  it 
was  two  years  ago,  and  will  doubtless  be  materially  lengthened 
within  the  next  five  years.  No  attempt,  therefore,  will  be 
made  to  give  in  this  treatise  a  summary  of  these  laws,  except 

(11) 


§  18  BUSINESS.  CORPORATIONS.  (Ch.  1 

in  so  far  as  it  may  be  necessary  for  the  purpose  of  indicating 
the  manner  in  which  the  proper  state  is  to  be  determined. 

§  18.     The  Corporation  Proposed. 

Let  us  assume  that  five  persons  desire  to  organize  a  corpora- 
tion for  the  purpose  of  conducting  a  general  mercantile  busi- 
ness to  be  carried  on  in  the  city  of  New  York.  The  capital 
stock  is  to  be  one  million  ($1,000,000)  dollars,  divided  into 
shares  of  one  hundred  ($100)  dollars  each,  of  which  seven  hun- 
dred thousand  ($700,000)  dollars  is  to  be  common  stock,  and 
three  hundred  thousand  ($300,000)  dollars  preferred.  These 
parties  wish  to  avail  themselves  of  the  benefit  of  such  laws  as 
will  expose  them  to  as  little  personal  liability  as  possible.  They 
desire  to  save  all  the  state  fees  they  can,  both  at  the  com- 
mencement and  during  the  progress  of  the  corporate  life. 
They  are  particularly  anxious  not  to  reveal  to  the  public,  any 
more  than  is  absolutely  necessary,  the  condition  of  their  busi- 
ness from  time  to  time. 

§  19.  The  foregoing  may  be  said  to  be  the  conditions  sur- 
rounding the  average  coterie  of  persons  at  this  stage  of  their 
enterprise. 

§  20.     Life  of  Corporations  and  Stockholders'  Liability. 

In  each  of  the  twelve  political  communities  above  enumerat- 
ed such  a  corporation  as  is  desired  may  be  formed.  In  each 
its  existence  may  be  made  perpetual,  except  in  West  Virginia, 
where  the  maximum  life  is  fifty  years,2  and  in  South  Dakota, 
where  the  maximum  life  is  twenty  years.3  In  all  the  liability 
of  the  stockholders  is  limited  to  the  amount  unpaid  on  their 
shares  of  stock  or  to  the  amount  unpaid  on  their  original  sub- 
scriptions. 

DIGEST  OF  LAWS. 

§  21.  The  following  is  a  b.'ief  digest  of  the  more  impor- 
tant provisions  of  the  laws  of  each  of  th  •  • :  twelve  states. 

a  W.  Va.  Code,  c.  54,  §  11.  a  S.  D.  Rev.  Ch    Code  1903,  §  780. 

(12) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  22 

Those  features  of  the  laws  generally  deemed  undesirable 
from  the  promoter's  standpoint  are  stated  in  italics;  those 
deemed  particularly  advantageous,  in  boldfaced  type. 

§  22.     Maine. 

(1)  Corporations  may  hold  stock  in  other  corporations.4 

(2)  Stock  may  be  issued  for  cash,  services  rendered,  or  prop- 
erty, as  to  the  value  of  which  (in  the  absence  or  fraud)  the 
judgment  of  the  directors  is  conclusive.5 

(3)  All  meetings  of  stockholders  must  be  held  within  the 
state.6 

(4)  No  maximum  limit  to  amount   of  capital;    minimum, 
$1,000.7 

(5)  No  provision  as  to  when  any  part  of  the  capital  must  be 
paid  in. 

(6)  All  incorporators  and  directors  may  be  nonresident. 

(7)  There  must  be  at  least  three  directors,  who  may  hold 
their  meetings  outside  of  the  state,  and  each  of  whom  must 
be  either  a  stockholder  or  a  member  of  another  corporation 
which  is  a  stockholder.8 

(8)  Directors  liable  for  declaring  illegal  dividends  and  for 
other  acts  involving  breach  of  trust.9 

(9)  The  records  of  the  company,  with  list  of  stockholders, 
their  residences  and  the  amount  of  stock  held  by  each,  must  be 
kept  in  the  state.10 

(10)  Annual  reports  must  state  the  names  and  residence  of 
directors,  president,  treasurer,  and  clerk,  location  of  principal 
office  in  the  state,  and  amount  of  authorized  capital  stock.11 

(11)  Organization  fee,  $100.12 

(12)  Annual  franchise  tax,  $50.13 

(13)  Collateral  inheritance  tax  on  stock.1* 

*  Rev.  St.  Me.  1904,  c.  47,  §  51.  •  Id.  §  32. 

6  Id.  §  50.  10  id.  §  20. 
e  Miller  v.  Ewer.  27  Me.  509,  46  Am.  Dec.  619.  "Id.  §  26. 

7  Rev.  St.  Me.  1904,  c.  47,  §  7.  12  Id.  §  8. 

s  Id.  §  19.  is  Id.  c.  8,  §  18. 

i*  Laws  1893,  c.  146,  as  amended  (Rev.  St.  1903,  c.  8,  §  69). 

(13) 


§  23  BUSINESS    CORPORATIONS.  (Ch.  1 

§  23.     Massachusetts. 

(1)  No  express  statutory  power  to  hold  stock  in  other  cor- 
porations, except  in  gas  companies.15 

(2)  Stock  may  be  issued  for  cash,  property,  or  services.16 

(3)  All  meetings  of  stockholders  must  be  held  within   the 
state.17 

(4)  No  maximum  limit  to  amount  of  capital  ;    minimum, 
$1,000.18 

(5)  No  provision  as  to  when  any  part  of  the  capital  must  be 
paid  in,  except  that  agreement  of  association  must  state  how 
much  is  to  be  paid  before  commencing  business.18 

(6)  All  incorporators  and  directors  may  be  nonresident. 

(7)  There  must  be  at  least  three  directors,20  who  may  hold 
their  meetings  outside  of  the  state,21  and  each  of  whom  (un- 
less otherwise  provided  by  the  by-laws)  shall  be  a  stockholder.22 

(8)  Directors  liable  for  illegally  issuing  stock,23   declaring 
illegal  dividends,2*   for  false  statements  knowingly  made  by 
them  in  the  articles  of  organization,25  or  reports,26  and  for 
debts  contracted  between  the  time  of  making  or  assenting  to 
a  loan  to  a  stockholder  or  director  and  the  time  of  its  repay- 
ment, to  the  extent  of  such  loan.27 

(9)  Copy  of  by-laws  and  minutes  of  meetings  of  the  stock- 
holders, and  stock  and  transfer  books  containing  a  complete 
list  of  names  and  residences  of  stockholders,  with  the  amount 
of  stock  held  by  each,  must  be  kept  in  the  state.28 

(10)  Annual  reports  required,  which  must  state  corporate 
name,  location  of  offices,  date  of  last  preceding  meeting,  total 
amount  of  authorized  capital  stock,  the  amount  issued  and  out- 
standing and  the  amount  then  paid  thereon,  the  class  or  classes 


is  See  chapter  110,  §  79,  Rev.  Corp.  Laws  Mass.;  Bus.  Corp. 
Laws  1903,  c.  437,  §  4. 

ie  B.  C.  L.  1903,  c.  437,  §  14. 

IT  Id.  §20.  21  id.  §  25.  SB  id.  §11. 

18  Id.  §  8.  22  Id.  §  18.  26  Id.  §  .84. 

i»  Id.  §  11.  23  id.  §  14.  27  id.  §  35. 

20  Id.  §  17.  24  Id.  §  35.  28  Id.  §  30. 


Ch.  1)  SELECTION    OF    DOMICILE.  §  24 

(if  any)  into  which  it  is  divided,  par  value  and  number  of  its 
shares,  and  their  market  value;  names  and  addresses  of  all 
the  stockholders,  and  amount  of  stock  held  by  each,  and,  if  any 
stock  is  pledged,  the  names  and  residences  of  pledgees ;  names 
and  addresses  of  the  directors  and  officers,  and  date  of  expira- 
tion of  term  of  office;  also  statement  of  the  assets  and  liabil- 
ities of  the  corporation.29 

(11)  Organization  fee,  $250.30 

(12)  Annual  franchise  tax  upon  the  value  of  its  corporate 
franchise,  after  deducting  the  value  of  its  real  estate  and  ma- 
chinery within  the  commonwealth  subject  to  local  taxation,  and 
of  securities  which  if  owned  by  a  natural  person  resident  in  the 
commonwealth  would  not  be  liable  to  taxation ;   also  the  value 
of  its  property  situated  in  another  state  or  country  and  subject 
to  taxation  there,  excepting  securities  which  if  owned  by  a 
natural  person  resident  in  Massachusetts  would  be  liable  to 
taxation ;    the  rate  of  assessment  to  be  determined  by  an  ap- 
portionment of  the  whole  amount  of  money  to  be  raised  by 
taxation  upon  property  in  the  commonwealth  during  the  same 
year,  after  deducting  the  amount  of  tax  assessed  upon  polls  for 
the  preceding  year,  upon  the  aggregate  valuation  of  all  cities 
and  towns  for  the  preceding  year ;  this  rate  of  assessment  be- 
ing subject  to  certain  limitations  expressed  in  the  business 
corporation  law.81 

(13)  A  collateral  inheritance  tax  is  imposed.33 

§  24.     Connecticut. 

(1)  Corporations   may   acquire   stock   in   other   corpora- 
tions.33 

(2)  Stock  may  be  paid  for  in  cash  or  property,  as  to  the 
value  of  which  the  judgment  of  the  directors  is  final.34 

29  Id.  §  45.  so  Id.  §  88. 

si  B.  C.  L.  1903,  §  72,  and  section  74,  as  amended  (Laws  1904,  p. 
±25,  c.  261). 

32  Rev.  Laws  Mass.  1902,  c.  15. 

as  Conn.  Corp.  Law   1903,  c.  194,  §  11. 

34  Id.    §   12. 

(15) 


§  24  BUSINESS    CORPORATIONS.  (Ch.  1 

(3)  All  meetings  of  stockholders  must  be  held  zvithin  the 
state.36 

(4)  No   maximum  limit  to  amount  of   capital ;    minimum, 
$2,000.89 

(5)  At  least  $1,000  must  be  paid  in  before  commencing  busi- 
ness.Z1 

(6)  All  incorporators  may  be  nonresident. 

(7)  There  must  be  at  least  three  directors,  who  should  be 
stockholders.88     No  statutory  provision  is  made  for  holding 
directors'  meetings  outside  of  the  state. 

(8)  Directors  liable   for  declaring  illegal   dividends 89    and 
for  fraud  in  overvaluing  the  property  received  in  payment  for 
stock.40 

(9)  Original  or  duplicate  transfer  books  containing  names 
and  addresses  of  each  stockholder  and  the  number  of  shares 
held  by  each  must  be  kept  in  the  state.*1 

(10)  Annual  reports  required,  showing  name,  residence,  and 
post  office  address  of  each  officer  and  director,  amount  of  out- 
standing stock  not  paid  in  full  and  amount  due  thereon,  and 
the  location  of  the  principal  office  in  the  state,  with  the  name 
of  the  agent  upon  whom  process  may  be  served.42 

(11)  Organization  fee,  $500.4S 

(12)  An  inheritance  tax  is  imposed  except  upon  stock  of  de- 
cedents living  in  a  state  where  no  such  tax  is  imposed.44 

(13)  No  annual  franchise  tax.45 

(14)  Voting  trust  illegal.*9 

so  id.  §  22.  ss  id.  §  10.  41  Id.  §  18. 

se  Id.  §  63.  «»  Id.  §  5.  42  id.  §  37. 

8f  Id.  §§  63,  69.  40  id.  §  12.  48  id.  §  61. 

44  Conn.  Gen.  St.  §  2368,  as  amended  May  6.  1903. 

40  Conn.  Corp.  Law,  c.  194.  §  61. 

40  Shepaug  Voting  Trust  Cases,  60  Conn.  553,  24  Atl.  32. 


Ch.  1)  SELECTION    OF    DOMICILE.  §  25 

§  25.     New  York. 

(1)  Corporations  may  hold  stock  in  other  corporations.47 

(2)  Stock  may  be  issued  for  money,  labor  done,  or  property, 
as  to  the  value  of  which  (in  the  absence  of  fraud)  the  judg- 
ment of  the  directors  is  conclusive.48 

(3)  It  has  been  held  that  meetings  of  the  stockholders  out- 
side of  the  state  are  invalid.** 

(4)  No  maximum  limit  to  the  amount  of  capital ;   minimum, 
$500.50 

(5)  No  debt  can  be  incurred  until  $500  shall  have  been  paid 
in  in  money  or  property.     One-half  the  capital  stock  must  be 
paid  in  within  one  year  from  date  of  incorporation^ 

(6)  At  least  one  incorporator  and  one  director  must  be  a 
resident  of  the  state  of  New  York.52 

(7)  There  must  be  at  least  three  directors,52  who  may  hold 
their  meetings  outside  the  state,53  and  each  of  whom  must 
be  a  stockholder  unless  he  is  named  in  the  ceitificate  of  incor- 
poration, provided  the  charter  or  by-laws  do  not  dispense  with 
this  requirement.54 

(8)  Directors  liable  for  declaring  illegal  dividends,  making 
false  reports,  breach  of  trust,  and  a  number  of  other  acts  of 
misconduct  specifically  enumerated  in  the  law.55 

(9)  Correct  books  of  account  of  all  business  and  transactions, 
and  a  stock  book  containing  the  names,  alphabetically  arranged, 
of  all  stockholders,  shoi^ing  their  residences  and  number  of 
shares  owned  by  each,  the  time  when  they  become  owners 

47  N.  Y.  S.  C.  L.  §  40. 

48  Id.     §    42. 

49  Ormsby  v.  Copper  Co.,  56  N.  Y.  623. 
so  N.  Y.  B.  C.  L.  §  2. 

si  Id.  §§  2,3,5;   S.  C.  L.  §  42. 

52  Id.  §  2;   G.  C.  L.  §§  4,  29,  as  amended  (Laws  1892,  pp.  1802,  1811, 
c.  687). 

33  X.  Y.  Laws  1904,  c.  446,  §  2. 
*4  X.  Y.  S.  C.  L.  §  20. 

53  id.  §  23.  as  amended  (Laws  1892,  p.  1829,  c.  688),  and  sections 
31,  48 ;   Pen.  Code  N.  Y.  §§  594-612. 

CLEPH.BUS.CORP.— 2  (17) 


§  25  BUSINESS   CORPORATIONS.  (Ch.  1 

thereof,  and  the  amount  paid  thereon,  must  be  kept  within  the 
state.67 

(10)  Annual  reports  must  show  the  amount  of  real  property 
owned,  the  amount  of  capital  stock  and  proportion  actually 
issued;   the  amount  paid  in;   the  amount  thereof  employed  in 
the  state;    the  amount  which  the  debts  do  not  exceed;    the 
minimum  amount  of  assets;   and  the  date  and  rate  per  centum 
of  each  dividend  declared** 

(11)  Organization  fee,  $500." 

(12)  For  the  purpose  of  computing  the  annual  franchise  tax 
a  distinction  is  made  between  corporations  paying  dividends 
at  the  rate  of  6  per  cent,  or  more  and  those  which  do  not. 
The  former  are  required  to  pay  an  annual  tax  of  one-quarter 
of  a  mill  for  each  1  per  cent,  of  dividend  on  each  dollar  of  the 
same  proportion  of  its  total  capital  as  the  assets  employed  in 
the  state  bear  to  its  total  assets.     Those  paying  dividends  of 
less  than  6  per  cent,  are  required  to  pay  a  tax  of  one  and  one- 
half  mills  upon  such  portion  of  the  capital  stock  at  par  as  the 
amount  of  capital  employed  within  the  state  bears  to  the  entire 
capital.     Those  paying  no  dividends  are   required  to  pay  a 
tax  of  one  and  one-half  mills  on  each  dollar  of  appraised  cap- 
ital stock  employed  in  the  state.60 

(13)  Direct  and  collateral  inheritance  tax  on  stock.61 

(14)  Cumulative  voting  permitted.62 

(15)  Voting  trust  authorized.62 

07  N.  T.  S.  C.  L.  §  29,  as  amended  (Laws  1892,  p.  1831,  c.  688). 

B8  N.  Y.  Tax  Laws,  §§  27.  189 ;   N.  Y.  S.  C.  L.  §  30. 

5»  Laws  1896,  c.  908,  §  180 :   Laws  1901,  c.  448. 

eo  N.  Y.  Tax  Laws,  §§  182,  183,  190. 

«i  In  re  Whiting's  Estate,  150  N.  Y.  27.  44  N.  E.  715.  34  L.  R.  A. 
232,  55  Am.  St.  Rep.  640 ;  In  re  Bronson's  Estate,  150  N.  Y.  1,  44  N. 
E.  707,  34  L.  R.  A.  238.  55  Am.  St  Rep.  632. 

62  N.  Y.  G.  C.  L.  §  20. 

(18) 


Ch.  1)  SELECTION    OF   DOMICILE.  §  26 

§  26.     New  Jersey. 

(1)  Corporations  may  hold  stock  in  other  corporations.88 

(2)  Stock  may  be  issued  for  cash  or  property,  as  to  the 
value  of  which  (in  the  absence  of  fr-aud)  the  judgment  of 
the  directors  is  conclusive.64     No  statutory  authority  is  given 
to  issue  stock  for  services  performed. 

(3)  All  meetings  of  stockholders  must  be  held  within  the 
state.™ 

(4)  No  maximum  limit  to  amount  of  capital;    minimum, 
$2,000.66 

(5)  One  thousand  dollars  of  capital  stock  must  be  subscribed 
before  the  company  can  do  business.67 

(6)  Incorporators  may  all  be  nonresident,68  but  at  least 
one  director  must  reside  in  the  state** 

(7)  There  must  be  at  least  three  directors,69  who  may  hold 
their  meetings  outside  of  the  state  if  the  charter  or  by-laws 
so  provide,70  and  each  must  be  a  stockholder.69 

(8)  Directors  liable  for  declaring  unauthorized  dividends,71 
for  making  false  reports,  or  withholding  reports  or  signs  72  re- 
quired by  law ; 73   for  making  loans  to  stockholders  or  officers  ; 
and  for  breach  of  trust.74 

(9)  Transfer  books  and  stock  books  containing  the  names 
and  addresses  of  the  stockholders  and  number  of  shares  held 
by  each  must  be  kept  in  the  state.76 

(10)  Annual  reports  must  show  the  name  of  the  corporation, 

«s  N.  J.  Corp.  Act,  §  51. 

s*  Id.  §§  48,  49 ;  Donald  v.  Refining  Co.,  62  N.  J.  Eq.  729,  48  Atl.  771. 

««s  N.  J.  Corp.  Act,  §  44. 

66  Id.    §    8. 

67  Id.  §§  8,  48,  49. 

ss  Central  R.  of  New  Jersey  v.  Railroad  Co.,  31  N.  J.  Eq.  475. 
«»  N.  J.  Corp.  Act,  §  12. 
TO  id.  §  44. 

71  Id.  §  30,  as  amended  (P.  L.  1896,  p.  286). 

72  Id.  §  45;    Appleton  v.  Malting  Co.  (Ct  Err.  &  App.  March  11, 
1903;  54  Atl.  454. 

73  N.  J.  Corp.  Act,  §  29.  T<  id.  §§  55,  92.  T6  id.  §  33. 

(19) 


§  26  BUSINESS   CORPORATIONS.  (Ch.  1 

location  of  the  registered  office  in  the  state,  and  name  of  agent 
upon  whom  process  may  be  served,  character  of  its  business, 
amount  of  authorized  capital  stock,  and  amount  actually  is- 
sued and  outstanding;  also  the  names  and  addresses  of  the 
officers  and  directors  and  when  their  terms  of  office  expire; 
date  of  the  next  annual  meeting  for  election  of  directors, 
whether  the  name  of  the  corporation  has  been  at  all  times  dis- 
played at  the  entrance  of  its  registered  office,  and  whether  such 
corporation  has  kept  there  the  books  required  by  law.7* 

(11)  Organization  fee,  $200. T7 

(12)  Annual  franchise  tax,  $1,000.78 

(13)  No  inheritance  tax  on  stock  owned  by  nonresidents.79 

(14)  Cumulative  voting  permitted.80 

(15)  Voting  trusts  may  be  created  under  certain  limita- 
tions.81 

§  27.     Delaware. 

(1)  Corporations  may  hold  stock  in  other  corporations.82 

(2)  Stock  may  be  issued  for  cash,  services  rendered,  or  prop- 
erty.83 

(3)  Stockholders'  meetings  may  be  held  outside  the  state 
of  Delaware  if  so  provided  in  the  by-laws.84 

(4)  No  maximum   limit   to  amount  of   capital;    minimum 
limit,  $2,000.85 

(5)  One  thousand  dollars  of  the  capital  stock  must  be  sub- 
scribed before  the  company  can  do  business.86 

(6)  All  incorporators  may  be  nonresident,  but  at  least  one 
director  must  reside  in  the  state.67 

re  Id.  §  43.  78  N.  j.  p.  L.  1901,  p.  31. 

"  Id.  §  114.  79  N.  J.  P.  L.  1894,  p.  318. 

so  N.  J.  P.  L.  1900,  p.  418. 

si  Chapman  v.  Bates,  61  N.  J.  Eq.  658.  47  Atl.  638,  88  Am.  St.  Rep. 
439. 

82  Del.  Corp.  Law  1903,  §  135. 
ss  Id.  §  14. 

84  Id,  §  32.  se  id. ;   Dill,  N.  J.  Corp.  p.  22. 

85  Id.  §  5.  87  pel.  Corp.  Law,  §  9. 
(20) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  28 

(7)  There  must  be  at  least  three  directors,87  who  may  hold 
their  meetings  outside  of  the  state  if  the  by-laws  so  pro- 
vide,88 and  each  must  be  a  stockholder.87 

(8)  Directors  liable  for  making-  unauthorized  dividends,"  for 
knowingly  making  false  reports  or  withholding  reports  required 
by  law,90  and  for  breach  of  trust. 

(9)  Original  or  duplicate  stock  ledger  containing  the  names 
and  addresses  of  the  stockholders,  and  the  number  of  shares 
held  by  each,  must  be  kept  in  the  state.91 

(10)  Annual  reports  must  state  the  location  of  the  principal 
office  in  the  state,  names  of  officers,  amount  of  the  authorized 
capital  and  what  part  of  it  is  actually  paid  in,  what  part  is 
invested  in  real  estate  and  the  annual  tax  thereon,  and  the 
amount  invested  in  manufacturing  or  mining  within  the  state, 
or  both.92 

(11)  Organization  fee,  $150.93 

(12)  Annual  franchise  tax,  $500.94 

(13)  Collateral  inheritance  ta.v  on  stock.gr° 

(14)  Bondholders  may  be  given  the  right  to  vote.9* 

§  28.     District  of  Columbia. 

(1)  Corporations  cannot  use  any  of  their  funds  in  the  pur- 
chase of  stock  of  other  corporations.97 

(2)  Stock  may  be  issued  either  for  money  or  property  at  its 
actual  value.98     ATo  statutory  authority  is  given  to  issue  stock 
for  services  performed. 

(3)  The  statute  is  silent  as  to  where  the  meetings  of  the 
stockholders  may  be  held. 

87  Del.  Corp.  Law,  §  9.  «*»  Id.  §  35. 

ss  id.  §  32.  so  id.  §  37. 

si  Id.  §  29. 

92  Del.  Franchise  Tax  Act  1901.  5  2. 

a  s  Del.  Corp.  Law,  §  129. 

94  Del.  Franchise  Tax  Act  1901,  §  4. 

95  Del.  Laws.  vol.  13.  c.  390,  §  12.  97  D.  C.  Code,  §  620. 

96  Del.  Corp.  Law,  §  29.  98  id.  §  613. 

(21) 


§  28  BUSINESS   CORPORATIONS.  (Ch.  1 

(4)  No  maximum  or  minimum  limit  to  the  amount  of  capital. 

(5)  Ten  per  cent,  of  the  capital  stock  must  be  paid  in  prior 
to  the  commencement  of  business." 

(6)  The  majority  of  the  trustees  shall  be  citizens  of  the  Dis- 
trict.100 

(7)  There  must  be  at  least  three  trustees,  each  of  whom  must 
be  a  stockholder.100     No  provision  is  made  as  to  the  place 
where  trustees  may  hold  their  meetings. 

(8)  Trustees  liable  for  knowingly  making  false  reports,101 
for  making  loans  to  stockholders  upon  the  security  of  the  cor- 
porate stock,102  and  for  declaring  illegal  dividends.103 

(9)  List  of  all  persons  who  are  or  have  been  within  six  years 
stockholders  of  the  company,  with  their  places  of  residence, 
number  of  shares  held  by  them  respectively,  the  time  when  they 
became  the  owners  thereof,  and  amount  of  stock  actually  paid 
in,  must  be  kept  in  the  District.10* 

(10)  Annual   reports  must  be  filed  and  published,   stating 
amount  of  capital  and  the  proportion  actually  paid  in,  and  the 
amount  of  existing  debts.105     Schedule  must  be  filed  annually 
stating  tangible  personal  property.106 

(11)  There  is  no  organization  fee,  except  a  nominal  fee  to 
the  recorder  of  deeds  for  recording  the  certificate  of  incorpo- 
ration. 

(12)  No  annual  franchise  tax.107 

(13)  No  inheritance  tax  on  stock. 

§  29.     Virginia. 

(1)  Corporations  may  hold  stock  in  other  corporations  if 
so  stated  in  the  charter.108 

»9  Id.  §  613.  i°3  Id.  §  622. 

100  id.  §  G08.  lo-t  id.  §§  027,  628. 

101  Id.  §  619.  105  Id.  §  617. 

102  id.  §  621.  ice  32  Stat  617. 
10733  Stat.  564. 

108  Gen.  Inc.  Act  Va.  c.  5,  §  2h  [1  Va.  Code  1904,  p.  557,  §  1105e, 
subd.  2h]. 
(22) 


Ch.  1)  SELECTION    OF   DOMICILE!.  §  29 

(2)  Stock  may  be  issued  for  cash,  services  rendered,  or  prop- 
erty, as  to  the  value  of  which  (in  the  absence  of  fraud)  the 
judgment  of  the  directors  is  conclusive.109 

(3)  Annual  meetings  of  the  stockholders  must  be  held  within 
the  state.110 

(4)  No  maximum  or  minimum  limit  to  the  amount  of  capital. 

(5)  No  provision  as  to  when  any  part  of  the  capital  must  be 
paid  in. 

(6)  All  incorporators  and  directors  may  be  nonresident.111 

(7)  There  must  be  at  last  three  directors,112  who  may  hold 
their  meetings  outside  of  the  state.113     The  statute  does  not 
require  directors  to  be  stockholders. 

(8)  Directors  liable   for   willfully  making  false  reports  114 
and  for  declaring  illegal  dividends.115 

(9)  No  books  need  be  kept  in  the  state. 

(10)  Annual  reports  must  state  the  name  of  the  corporation, 
location  of  principal  office  in  the  state  and  name  of  the 
agent  upon  whom  process  may  be  served,  character  of  its  busi- 
ness, amount  of  authorized  capital  stock,  what  part  of  it  is 
actually  issued  and  outstanding,  names  and  addresses  of  the 
officers  and  directors  and  when  their  terms  of  office  expire,  and 
the  date  appointed  for  the  next  annual  meeting  of  the  stock- 
holders.116 

(11)  Organization  fee,  $600.11T 

'  (12)  Annual  franchise  and  registration  fee,  $225. 118 
(13)  Collateral  inheritance  tax  on  stock.119 

109  id.  §  9  [1  Va.  Code  1904,  p.  559,  §  llOoe,  subd.  9]. 
no  Id.  §  7  [1  Va.  Code  1904,  p.  559,  §  1105e,  subd.  7]. 
in  Id.  c.  1,  §  14  [1  Va.  Code  1904,  p.  532,  §  1105a,  subd.  141. 
112  Id.  §  13  [1  Va.  Code  1904,  p.  532,  §  1105a,  subd.  131 ;   Id.  c.  5,  § 
10  [1  Va.  Code  1904,  p.  560,  §  1105e,  subd.  10]. 

us  Id.  c.  5,  §  5  [1  Va.  Code  1904,  p.  558,  §  1105e,  subd.  5]. 
114  Id.  §  26  [1  Va.  Code  1904,  p.  564,  §  1105e,  subd.  26]. 
us  Id.  §  60  [1  Va.  Code  1904,  p.  578,  §  1105e,  subd.  60]. 
us  Id.  §  39  [1  Va.  Code  1904,  p.  570,  §  1105e.  subd.  39]. 
117  Tax  Law  1903.  §  38  [2  Va.  Code  1904.  p.  2215]. 
us  id.  §§  41.  43  [2  Va.  Code  1904.  p.  2218]. 
n»  Id.  §  44  [2  Va.  Code  1904,  p.  2219]. 

(23) 


§  29  BUSINESS    CORPORATIONS.  (Ch.  1 

(14)  Cumulative  voting  permitted.120 

(15)  Bondholders  may  be  given  the  right  to  vote.121 

§  30.     West  Virginia. 

(1)  Corporations  may  hold  stock  in  other  corporations.122 

(2)  Stock  may  be  issued  for  cash,  services  rendered,  or  prop- 
erty, as  to  the  value  of  which  (in  the  absence  of  fraud)  the 
judgment  of  the  directors  or  stockholders  is  conclusive.123 

(3)  Stockholders'  meetings  may  be  held  outside  of  the 
state.12* 

(4)  No  maximum  or  minimum  limit  to  the  amount  of  capital. 

(5)  Ten  per  cent,  of  the  amount  subscribed  by  each  incor- 
porator  must  be  paid  in  before  signing  the  articles  of  incor- 
poration.125 

(6)  All  incorporators  and  directors  may  be  nonresident.126 

(7)  There  must  be  at  least  five  directors  (unless  otherwise 
provided  in  the  by-laws),126  who  may  hold  their  meetings  out- 
side of  the  state,127  and  none  of  whom  need  be  stockhold- 
ers.126 

(8)  Directors  liable  for  declaring. illegal  dividends  12S  and  for 
breach  of  trust. 

(9)  No  books  need  be  kept  in  the  state. 

(10)  Annual  reports  must  be  made  showing  the  name  of  the 
corporation,  date  of  its  charter,  name  and  post  office  address 
of  the  president,  secretary,  and  treasurer,  the  amount  of  its  au- 
thorized capital  stock,  number  of  acres  of  land  held  in  the 


120  Gen.  Inc.  Act  Va.  c.  5,  §  19  [1  Va.  Code  1904,  p.  563,  §  1105e, 
subd.  19]. 

121  Id.  §  29  [1  Va.  Code  1904,  p.  565,  §  1105e,  subd.  29]. 

122  w.  Va.  Code,  c.  52,  §  3,  as  amended  (Acts  1901,  p.  94.  c.  35,  §  1). 

123  Spring  Garden  Bank  v.  Lumber  Co.,  32  W.  Va.  357,  9  S.  E.  243, 
3  L.  R.  A.  583 ;   Richardson  v.  Grabaru,  45  W.  Va.  134,  30  S.  E.  92. 

124  w.  Va.  Code,  c.  54,  §  23. 

125  id.  §  7.  127  id.  c.  54,  §  L'::. 

126  id.  c.  53,  §  49.  128  id.  c.  53,  §  40. 
(24) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  31 

state  (if  the  number  exceeds  10,000),  and  such  other  facts  as 
the  auditor  may  require.129 

(11)  Organization  fee,  $410.130 

(12)  Annual  franchise  tax,  $410.130 

(13)  Collateral  inheritance  tax  on  stock.191 

(14)  Cumulative  voting  permitted.132 

(15)  Action  of  majority  of  directors  may  be  valid  without 
calling  a  regular  meeting  of  the  board.133 

§  31.     South  Dakota. 

(1)  Corporations  have  no  statutory  power  to  hold  stock  in 
other  corporations. 

(2)  Stock  may  be  issued  for  cash,  services  rendered,  or  prop- 
erty.134 

(3)  Stockholders'  meetings  may  be  held  outside  of  the 
state.135 

(4)  No  maximum  or  minimum  limit  to  the  amount  of  capital. 

(5)  No  provision  as  to  when  any  part  of  the  capital  must  be 
paid  in. 

(6)  One-third  of  the  incorporators  must  reside  in  the  state.136 

(7)  There  must  be  at  least  three  directors,137  who  may 
hold  their  meetings  outside  of  the  state,138  and  all  of  whom 
must  be  stockholders.137 

(S)  Directors  liable  for  illegally  reducing  the  capital  stock, 
for  declaring  illegal  dividends,  and  for  creating  debts  beyond 
the  subscribed  capital  stock,139  and  for  otherwise  willfully  caus- 
ing the  corporation  to  become  insolvent  in  violation  of  the 

129  id.  e.  32,  §  88,  as  amended  (Acts  1901,  p.  114,  c.  35,  §  36). 
iso  id.  c.  32,  §  87,  as  amended  (Acts  1901,  p.  112,  c.  35,  §  35) 

131  Id.  §  51a  (I). 

132  id.  c.  53,  §  44. 

IBS  id.  §  51,  as  amended  (Acts  1901,  p.  100,  c.  35,  §  16). 
is*  S.  D.  Const,  art.  17.  §  S.  is?  Id.  §  434. 

135  Rev.  Civ.  Code  S.  D.  §  786.  iss  id.  §  786. 

136  Id.    §    410.  139  Id.   §   43G. 

(L>5) 


§  31  BUSINESS   CORPORATIONS.  (Ch.  1 

statute;  14°  also  for  failing  to  file  the  annual  report,1*4  or  for 
willful  false  statements  in  such  annual  report;141  also  for 
fraudulent  appropriation  of  property.142 

(9)  Copy  of  the  by-laws,  record  of  all  business  transactions, 
journal  of  all  meetings  of  directors  and  stockholders,  embracing 
every  act  done  or  ordered  to  be  done,  and  stating  ivho  were 
present  and  absent  as  ivell  a-s  other  details,  must  be  kept  in  the 
"office  of  the  corporation" ;  also  a  stock  and  transfer  book  show- 
ing the  names  of  all  stockholders,  installments  paid  or  unpaid, 
assessments  levied  and  paid  or  unpaid;  particulars  as  to  every 
stock  transfer,  etc.l*s 

(10)  Annual  reports  must  be  published,  stating  the  capital 
stock  and  amount  actually  paid  in,  and  amount  and  nature  of 
indebtedness  due  to  and  by  the  corporation,  number  and  amount 
of  dividends  and  when  paid,  and  net  amount  of  profits.14* 

(11)  Organization  fee,  $25.146 

(12)  No  annual  franchise  tax. 
(13.)  No  inheritance  taxes. 

(14)  Cumulative  voting  permitted.146 

§  32.     Nevada. 

(1)  Corporations  may  hold  stock  in  other  corporations.147 

(2)  Stock  may  be  issued  for  cash,  services  rendered  or  prop- 
erty, as  to  the  value  of  which  (in  the  absence  of  fraud)  the 
judgment  of  the  directors  is  conclusive.148 

(3)  Stockholders'  meetings  may  be  held  outside  of  the 
state.149 

(4)  No  maximum  limit  to  the  amount  of  capital ;   minimum, 
$2,000.1BO 

(5)  $1,000  of  the  capital  stock  must  be  subscribed  before  the 
company  can  commence  business.160 

"o  Rev.  Civ.  Code  S.  D.  §  787.  "s  id.  §§  430,  445. 

1*1  Id.  §  437.  i"  Id.  §  784. 

"2  Id.  §§  436,  449.  i*s  S.  D.  Laws  1903.  c.  141. 

I"  Const.  S.  D.  art  17,  §  5. 
1*7  Xev.  Gen.  Inc.  Laws   1903,  §  110. 

us  id.  §§  28,  54.  i*9  Id.  §§  12-14.  iGo  id.  §  4. 

(26) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  33 

(6)  All  incorporators  and  directors  may  be  nonresident. 

(7)  There  must  be  at  least  three  directors,  who  may  hold 
their  meetings  outside  of  the  state.151 

(8)  Directors  liable  for  declaring  illegal  dividends  152  or  ille- 
gally  reducing   capital    stock,153    for   publishing    false    state- 
ments, 154  and  for  breach  of  trust.155 

(9)  Stock  ledger  containing  the  names  and  addresses  of  all 
stockholders,  with  the  number  of  shares  of  stock  owned  by 
each,  must  be  kept  in  the  state.166 

(10)  Annual  reports  required,  stating  names  of  all  directors 
and  officers,  with  date  of  election  or  appointment  of  each,  term 
of  office,  residence  and  post  office  address  of  each,  and  character 
of  his  business,  with  location  of  principal  office  in  the  state  and 
name  of  agent  in  charge  thereof;  157    certificate  also  required 
stating  amount  of  each  installment  paid  in  on  capital  stock, 
character  of  payment,  and  value  of  property  or  services  ac- 
cepted in  payment;    also  total  amount  of  capital  stock  pre- 
viously paid  and  reported.158 

(11)  Organization  fee,  $150.159 

(12)  No   annual   franchise   tax,   except   retaliatory   taxa- 
tion.160 

(13)  No  inheritance  taxes. 

(14)  Cumulative  voting  permitted.161 

(15)  Bondholders  may  be  given  the  right  to  vote.162 

(16)  Action  of  majority  of  stockholders  or  directors  may 
be  valid  without  calling  a  regular  meeting.163 

§  33.     Porto  Rico. 

(1)  Corporations  may  hold  stock  in  other  corporations 
owning  property  necessary  for  its  business.164 


151  Id. 

§§  14,  23. 

165  Id.  { 

i  76. 

15910.  i 

I  102. 

152  Id. 

§  68. 

156  Id.  j 

!§  58,  71. 

160  Id.  ! 

}  106. 

153  Id. 

§  42. 

157  Id.  i 

}  85. 

161  Id.  i 

I  20. 

154  Id. 

§§  73,  77. 

158  Id.  { 

S  34. 

162  Id.  i 

i  11. 

163  Id.  i 

5§  23.  111. 

G  -i  Civ.  Code  Porto  Rico.  tit.  2,  c.  1,  §  45. 


§  33  BUSINESS   CORPORATIONS.  (Ch.  1 

(2)  Stock  may  be  issued  for  cash  or  property,  as  to  the  value 
of  which  (in  the  absence  of  fraud)  the  judgment  of  the  di- 
rectors is  conclusive.164     No  statutory  authority  is  given  to 
issue  stock  for  services  performed. 

(3)  All  meetings  of  stockholders  must  be  held  in  the  island.165 

(4)  No  maximum  limit  to  the  amount  of  capital ;    minimum 
limit,  $2,000.169 

(5)  Cannot  commence  business  until  at  least  $1,000  has  been 
paid  in.168 

(6)  Incorporators  may  be  all  nonresidents,  but  at  least  one 
director  must  reside  on  the  island.16'' 

(7)  There  must  be  not  less  than  three  directors,168  who  may 
hold  their  meetings  outside  of  the  state  if  the  charter  or  by- 
laws so  provide,169  and  each  must  be  a  stockholder.168 

(8)  Directors  liable  for  declaring  unauthorized  dividends,170 
for  knowingly  making  false  reports,171  and  for  voting  to  incur 
any  indebtedness  in  excess  of  capital.172 

(9)  Transfer  books,  and  stock  books  containing  the  names 
and  addresses  of  stockholders  and  number  of  shares  held  by 
each,  must  be  kept  on  the  island.173 

(10)  Annual  reports  must  show  the  name  of  the  corpora- 
tion, location  of  the  principal  office  on  the  island,  and  name  of 
the  agent  upon  whom  process  may  be  served;    object  of  the 
corporation,  amount  of  its  authorized  capital  stock,  and  the 
amount  actually  issued  and  outstanding,  existing  liabilities, 
names  and  addresses  of  directors  and  officers  and  terms  of  of- 
fice, date  of  next  annual  meeting  for  election  of  directors,  and 
whether  the  law  regarding  the  maintenance  of  the  office  on  the 
island  has  been  complied  with.174 

(11)  Organization  fee,  $150.175 

(12)  No  annual  franchise  tax. 

164  Civ.  Code  Porto  Rico,  tit  2,  c.  1,  §  45. 

i«5  Id.  §  42a.  lea  Id.  §  41.  ITS  id.  §§  41,  47. 

lee  Id.  §  36  (5).  170  Id.  §  40.  IT*  Id.  §  52. 

167  Id.  §  38.  i7i  Id.  §  61.  "5  Id.  §  63. 

168  Id.   §   40.  172  Id.    §   62. 

(28) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  35 

(13)  No    inheritance   tax    on    stock    owned    by    nonresi- 
dents.178 

(14)  Cumulative  voting  permitted.171 

NOTE.     The  corporation  law  of  Porto  Rico  was  patterned  after 
that  of  New  Jersey. 


ANALYSIS  OF  THE  FOREGOING  LAWS. 

§  34.  We  must  assume  that  the  shares  of  stock  which  will 
be  issued  by  our  proposed  corporation  will  ultimately  find  their 
way  into  the  hands  of  many  people,  the  majority  of  whom  will 
probably  reside  in  the  vicinity  of  the  city  of  New  York.  That 
being  the  place  where  the  business  of  the  company  is  to  be 
carried  on,  it  will  be  convenient  to  have  the  corporate  meetings 
held  as  near  the  main  office  of  the  company  as  practicable.  It 
would  be  extremely  troublesome  to  the  stockholders  to  be 
obliged  to  travel  to  a  distant  state  every  time  a  stockholders' 
meeting  is  to  be  held.  If,  therefore,  it  should  appear  that  cer- 
tain places  whose  corporation  laws  are  otherwise  adapted  to  our 
purpose  require  all  corporate  meetings  to  be  held  within  their 
borders,  such  states  may  be  thrown  out  of  our  consideration, 
provided  other  jurisdictions  nearer  home  hold  out  inducements 
nearly  as  great. 

§  35.  A  glance  at  the  foregoing  table  will  satisfy  us  that 
it  would  be  inconvenient  to  take  advantage  of  the  beneficial 
laws  of  Maine,  Massachusetts,  Virginia,  or  Porto  Rico  on  this 
very  ground.  The  meetings  of  stockholders  of  corporations 
chartered  by  any  of  those  jurisdictions  must  be  held  within 
the  state  or  territory  granting  the  charter.178  While  those  re- 
siding near  to  or  within  the  borders  of  any  of  these  common- 
wealths might  well  incorporate  in  one  of  them,  we  find  them 

"6  Rev.  St.  &  Codes  Porto  Rico,  p.  455.  §  368. 

ITT  Civ.  Code  Porto  Rico,  tit.  2,  c.  1,  §  49. 

IT s  Miller  v.  Ewer,  27  Me.  509,  46  Am.  Dec.  619;  B.  C.  L.  Mass. 
1903,  c.  437,  §  20;  Gen.  Inc.  Act  Va.  c.  5,  §  7  [1  Va.  Code  1904,  p. 
559,  §  1105e,  subd.  7] ;  Civ.  Code  Porto  Rico,  tit.  2,  c.  1,  §  42n. 


§  35a  BUSINESS  CORPORATIONS.  (Ch.  1 

unsuited  for  our  purposes,  with  no  counterbalancing  advantages 
which  cannot  be  found  elsewhere. 

§  35a.  The  inconvenience  of  holding  stockholders'  meetings 
at  some  distance  from  the  place  of  business  and  from  the  resi- 
dence of  shareholders  might  be  obviated  by  delivering  proxies  to 
persons  either  residing  within  the  state  or  who  can  be  persuaded 
to  travel  there  for  the  purpose  of  such  meetings.  But  as  a  rule 
stockholders  like  to  be  able  to  attend  such  meetings  in  person, 
and  learn  for  themselves  how  the  business  of  the  company  is 
being  conducted,  even  though  on  ordinary  occasions  they  may 
not  avail  themselves  of  the  privilege. 

§  35b.  In  Maine  179  and  Massachusetts  18°  a  collateral  in- 
heritance tax  is  imposed  upon  stock  whether  owned  by  residents 
or  nonresidents — a  burden  which  it  is  well  to  avoid  if  possi- 
ble. 

§  35c.  The  detailed  nature  of  the  annual  report  required  in 
Massachusetts 181  necessitates  greater  publicity  than  that  to 
which  our  supposed  incorporators  desire  to  be  subjected,  and 
in  that  state  no  express  authority  is  given  for  holding  stock  in 
other  corporations. 

§  36.  In  Connecticut  we  have  the  same  restriction  upon 
the  place  of  holding  stockholders'  meetings,  to  wit,  that  they 
must  be  held  within  the  state;  but  as  Connecticut  is  so 
easily  accessible  to  New  York,  this  will  not  prove  very  much' 
of  a  hindrance.  There  is,  however,  an  omission  in  the  statute 
which  might  cause  trouble.  No  statutory  provision  is  found 
enabling  the  directors  to  hold  their  meetings  outside  of  the 
state.  The  directors  should  be  able  to  meet  at  short  notice  at 
a  place  readily  available  to  all  concerned.  If  they  must  travel 
outside  of  the  state  to  accomplish  this,  the  machinery  for  con- 
ducting the  corporate  business  will  be  found  somewhat  cumber- 

i7«  Laws  1893,  c.  146,  as  amended  (Rev.  St.  1904,  c.  8,  §  09). 
iso  Rev.  Laws  Mass.  1902,  c.  !."». 
isi  B.  C.  L.  Mass.  1903,  c.  437,  §  45. 
(30) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  38 

some.     More  will  be  said  in  another  place  upon  the  law  re- 
lating to  the  place  of  holding  such  meetings.182 

§  36a.  Should  the  stockholders  desire  to  organize  a  voting 
trust,  they  will  in  this  state  be  met  with  a  decision  squarely 
holding  such  combinations  illegal.188  A  consideration  which 
would  influence  many  in  determining  to  select  Connecticut  as 
the  domicile  of  a  corporation  is  the  fact  that  because  that 
state  requires  no  annual  franchise  tax,  this  yearly  expenditure, 
which  must  be  made  under  the  laws  of  most  other  places, 
would  be  saved. 

,  §  37.  South  Dakota  does  not  seem  attractive  from  our 
standpoint.  One-third  of  the  incorporators  must  reside  in  that 
state.184  For  a  corporation  whose  habitat  is  in  New  York  this 
would  not  be  particularly  conducive  to  the  proper  transaction 
of  business.  Many  corporations  overcome  this  difficulty  by 
resorting  to  dummy  incorporators  and  directors  who  reside  in 
that  state.  But  this  is  hardly  a  dignified  procedure  nor  one 
that  commends  itself  to  the  average  business  man. 

§  37a.  On  examining  further  into  the  laws  of  that  state, 
two  features  which  exist  would  cause  us  to  hesitate  a  long 
while  before  resorting  to  the  protection  of  its  franchise.  These 
are,  first,  the  failure  to  permit  the  holding  of  stock  in  other 
corporations;  and,  second,  the  fact  that  every  corporate  act 
must  appear  on  record,  open  to  the  inspection  of  every  cred- 
itor.186 

§  37b.  As  offsetting  these  disadvantages,  this  state  provides 
the  same  economical  exemption  from  any  annual  franchise  tax 
as  does  Connecticut. 

§  38.  Much  has  been  said  by  corporation  promoters 
throughout  the  country  about  the  advantages  offered  under  the 
Code  of  the  District  of  Columbia,  frequently  spoken  of  as  "The 

182  infra,  c.  II. 

IBS  Shepaug  Voting  Trust  Cases,  60  Conn.  553,  24  Atl.  32. 

"4  Rev.  Civ.  Code  S.  D.  §  410. 

iss  id  §  445. 

(3D 


§  38a  BUSINESS   CORPORATIONS.  (Ch.  1 

Great  National  Corporation  Law."  It  is  true  that  this  is  a 
law  passed  by  the  Congress  of  the  United  States,  but  that  it 
is  "national"  in  any  sense  of  the  word  is  a  misnomer.  In  enact- 
ing this  law  Congress  acted  merely  as  the  local  legislature  of 
the  District  of  Columbia,  under  that  power  in  the  Constitution 
of  the  United  States  which  gives  to  Congress  the  right  to  "ex- 
ercise exclusive  legislation  in  all  cases  whatsoever  over  such 
District  (not  exceeding  ten  miles  square)  as  may  by  cession  of 
particular  states,  and  the  acceptance  of  Congress,  become  the 
seat  of  government  of  the  United  States."  186 

§  38a.  No  authority  is  found  in  this  clause  for  creating  a 
corporation  except  in  this  federal  territory,  and  charters  grant- 
ed under  its  sanction  are  really  no  more  national  than  are  char- 
ters granted  under  the  laws  of  any  state.187 

§  38b.  The  law  is  crude  in  many  respects.  Instead  of  be- 
ing framed  after  the  approved  models  which  have  been  found 
by  experience  to  work  so  well  elsewhere,  it  is  an  astonishing 
fact  that  many  of  the  provisions  the  wisdom  of  inserting  which 
in  other  codes  of  laws  has  been  demonstrated  by  experience 
are  entirely  omitted  in  this  compilation,  and  much  is  left  to 
conjecture.  The  courts  have  not  yet  construed  the  law,  and 
persons  availing  themselves  of  it  will  be  left  in  great  doubt 
upon  many  points. 

§  38c.  The  fact  that  the  residences  of  the  majority  of  the 
"trustees"  (not  "directors,"  as  they  are  generally  called)  is  re- 
stricted to  the  District  of  Columbia  will  prevent  our  proposed 
corporation  from  utilizing  these  laws.188  It  has  been  claimed 
that  this  section  of  the  Code  relates  only  to  the  trustees  named 
in  the  certificate  of  incorporation,  but  the  ground  for  this 
contention  is  not  apparent.  The  provision  that  the  corpora- 
te u.  S.  Const,  art  1,  §  8,  cl.  17. 

187  Daly  v.   Insurance  Co.,   64  Ind.  1;    Williams  v.  Creswell,   51 
Miss.  817 ;    Hadley  v.  Trust  Co.,  2  Tenn.  Ch.  122 ;    10  Cyc.  169.     See, 
also,  Huntington  v.  Bank,  96  U.  S.  388,  24  L.  Ed.  777;    ScLeffer  v. 
Insurance  Co.,  25  Minn.  534. 
iss  D.  C.  Code,  §  608. 
(32) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  38g 

tion  may  not  transact  business  until  10  per  cent,  of  the  capital 
shall  have  been  actually  paid  in  may  also  prove  a  stumbling- 
block.189  It  may  not  be  desirable,  either,  to  file  an  annual  report 
stating  the  amount  of  existing  debts,  as  the  District  of  Co- 
lumbia Code  specifies  must  be  done.190  In  this  connection,  how- 
ever, it  should  be  stated  that  the  only  penalty  provided  for  not 
making  this  report  is  that  any  interested  person  may  by  man- 
damus proceedings  compel  the  publication  of  the  report,  in 
which  case  the  corporation  officers  at  fault  may  be  compelled 
to  pay  all  the  expenses  of  the  proceeding,  including  counsel 
fees.191 

§  38d.  No  corporation  organized  under  the  District  of  Co- 
lumbia laws  can  use  any  of  its  funds  in  the  purchase  of  stock  in 
another  corporation.182 

§  38e.  It  is  also  well  to  bear  in  mind  that  a  District  of 
Columbia  corporation  (which  under  the  law  is  a  citizen  of  the 
District  of  Columbia)  is  not  permitted  to  sue  in  the  federal 
courts,  because,  not  being  a  citizen  of  any  state,  it  is  not  em- 
braced within  the  privilege  conferred  by  the  Constitution  of  the 
United  States  in  this  regard.193 

§  38f.  Other  sections  of  the  law  might  be  cited  which 
would  have  a  deleterious  effect,  but  these  are  sufficient  to  indi- 
cate that  the  District  of  Columbia  is  not  a  favorable  domicile, 
at  least  for  nonresident  corporations,  however  wise  it  misfht 
be  for  resident  corporations  to  organize  there. 

§  38g.  There  is  nevertheless  great  economy  in  incorporat- 
ing under  these  laws,  inasmuch  as  there  is  no  fee  charged  either 
for  conferring  the  corporate  privilege  (except  the  recorder's 
fee  for  recording  the  charter)  nor  for  the  annual  franchise. 

189  id.  §  613.  i9i  id.  §  618. 

i»o  id.  §  617.  i«2  id.  §  620. 

193  Hepburn  v.  Ellzey,  2  Cranch  (U.  S.)  445,  2  L.  Ed.  332;  Barney 
v.  Baltimore,  6  Wall.  (U.  S.)  280,  18  L.  Ed.  825 ;  Infra,  §  38a,  and 
note ;  In  re  Cushing's  Estate,  40  Misc.  Rep.  505,  82  N.  Y.  Supp.  795 ; 
Adams  Exp.  Co.  v.  Railroad  Co.  (C.  C.)  16  Fed.  712. 

CLEPH.BUS.COBP.— 3  (33) 


§  39  BUSINESS    CORPORATIONS.  (Ch.  1 

§  39.  An  examination  of  the  new  incorporation  law  of  the 
state  of  Nevada  discloses  none  of  the  undesirable  features  indi- 
cated in  considering  the  laws  of  the  states  before  mentioned. 
In  fact  it  seems  to  have  been  the  effort  of  the  framers  of  this 
law  to  weave  into  it  the  particularly  attractive  provisions  en- 
acted by  the  legislatures  of  the  states  of  New  Jersey,  Delaware, 
and  West  Virginia,  which  we  shall  presently  consider.  There 
is  no  annual  franchise  tax.  Those  residing  in  Western  states 
would  do  well  to  seriously  consider  the  statute  of  this  state  be- 
fore deciding  to  incorporate  elsewhere.  But  to  Eastern  capital- 
ists several  objections  present  themselves :  First.  It  is  far 
away  from  them  and  their  business,  and  in  the  present  state  of 
corporate  development  suspicion  is  apt  to  be  aroused  in  the 
minds  of  the  public  if  resort  is  had  to  a  state  so  distant,  if  sim- 
ilar advantages  can  be  found  nearer  home.  Second.  It  is  un- 
wise, if  not  unlawful,  to  hold  the  initial  meeting  outside  of  the 
state  which  confers  the  charter  privileges.  This  would  prac- 
tically require  our  intended  incorporators  either  to  travel  near- 
ly to  the  Pacific  Coast  to  organize,  or  else  to  send  their  proxies 
to  some  one  in  that  state,  and  effect  their  organization  through 
straw  men — a  device  which  is  frequently  resorted  to,  but  one 
the  wisdom  of  which  is  doubtful. 

§  40.  This  leaves  for  our  consideration  only  four  states, 
viz.,  New  York,  New  Jersey,  Delaware,  and  West  Virginia. 
Taking  first  the  three  states  which  are  foreign  to  the  proposed 
place  of  business  of  our  assumed  incorporators,  a  brief  com- 
parison of  their  laws  is  in  order.  Of  these  states  West  Vir- 
ginia was  the  pioneer  in  liberal  incorporation  laws.  The  reve- 
nues derived  from  the  creation  of  corporations  there  became  so 
great  that  New  Jersey  so  changed  its  statute  as  to  permit  of 
very  much  greater  liberality  than  previously  was  allowed. 
Delaware  then  passed  a  law  copied  very  closely  from  that  of 
New  Jersey,  but  adding  certain  provisions  not  included  in  the 
legislation  of  the  latter  state. 
(34) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  4:1 

§  41.  Some  of  the  differences  between  the  laws  of  these 
two  last-named  states  are  as  follows :  In  Delaware  stock  may 
be  issued  for  services  rendered,194  not  so  in  New  Jersey;195 
but  this  omission  may  be  so  easily  circumvented  in  practice  as 
to  cause  little  concern.  In  New  Jersey  the  judgment  of  the 
board  of  directors  as  to  the  value  of  the  property  taken  for 
stock  is,  in  the  absence  of  fraud,  conclusive.196  The  Delaware 
statute  makes  a  similar  provision,197  but  it  has  been  contended 
that  it  is  opposed  to  the  constitution  of  that  state;  if  so,  it 
would  be  void.  Delaware  has  an  advantage  over  New  Jersey, 
in  that  by  the  laws  of  the  former  state  stockholders'  meetings 
may  be  held  beyond  the  limits  of  the  state,198  whereas  in  New 
Jersey  they  must  be  held  in  the  state.199  In  view  of  the  fact 
that  but  little  time  would  be  consumed  in  crossing  the  ferry 
between  New  York  City  (where  our  intended  place  of  business 
is  to  be)  and  Jersey  City,  this  will  not  prove  an  embarrass- 
ment in  this  particular  case.  Both  states  have  a  collateral 
inheritance  tax,  but  in  New  Jersey  it  does  not  apply  to  non- 
residents,200 whereas  in  Delaware  it  does.201  In  Delaware 
bondholders  may  be  given  the  right  to  vote.202  No  such  pow- 
er is  given  by  the  New  Jersey  laws ;  but  the  laws  of  the  lat- 
ter state  do  permit  cumulative  voting,203  a  feature  upon  which 
the  statutes  of  Delaware  are  silent.  In  New  Jersey,  moreover, 
voting  trusts  may  be  created  under  certain  limitations.20* 


194  Del.  Corp.  Laws  1903.  §  14. 

195  N.  J.  Corp.  Act,  §§  48,  49. 

196  N.  J.  Corp.  Act,  §§  48,  49;    Donald  v.  Refining  Co.,  62  N.  J.  Eq 
729,  48  Atl.  771. 

i»7  Del.  Corp.  Law  1903,  §  14. 

i»s  id.  §  32. 

i99X.  j.  Corp.  Act,  §  44. 

200  N.  J.  P.  L.  1894,  p.  318. 

201  Del.  Laws,  vol.  13,  c.  390,  §  12. 

202  Del.  Corp.  Law  1903,  §  29. 

203  N.  J.  P.  L.  1900,  p.  418. 

204  Chapman  v.  Bates,  61  N.  J.  Eq.  658,  47  Atl.  638,  88  Am.  St.  Rep. 
459. 

(35) 


§  41a  BUSINESS   CORPORATIONS.  (Cll.  1 

§  41a.  On  the  whole,  the  laws  of  New  Jersey  seem  more 
favorable  than  those  of  Delaware  for  our  purposes,  although 
the  initial  fee  in  Delaware  for  organizing  a  corporation  is  only 
$150,205  as  opposed  to  $200  in  New  Jersey,206  and  the  annual 
franchise  fee  in  the  former  state  is  only  $500,207  as  opposed  to 
$1,000  in  New  Jersey.208 

§  41b.  Contrasting  the  laws  of  New  Jersey  with  those  of 
West  Virginia  we  find  their  main  provisions  quite  similar. 
Under  the  West  Virginia  laws,  stock  may  be  issued  for  serv- 
ices rendered,209  and  stockholders'  meetings  may  be  held  out-, 
side  of  the  state.210  None  of  the  directors  need  be  residents,211 
as  is  the  case  in  New  Jersey.212  No  corporate  books  need  be 
kept  there,  and  the  annual  reports  required  to  be  filed  need 
not  state  so  many  details.213  In  West  Virginia  the  action  of  the 
majority  of  the  directors  may  be  valid  without  calling  a  regu- 
lar meeting  of  the  board ; 214  under  the  New  Jersey  laws  the  di- 
rectors can  only  act  as  a  board  in  regular  meetings.215  In 
West  Virginia  the  initial  and  annual  tax  is  $410,216  as  against 
an  initial  fee  of  $200  21T  and  an  annual  tax  of  $1,000  218  in 
New  Jersey. 


205  Del.  Corp.  Law,  §  129. 
see  N.  J.  Corp.  Act,  §  114. 

207  Del.  Franchise  Tax  Act  1901,  §  4. 

208  N.  J.  P.  L.  1901,  p.  31. 

209  Spring  Garden  Bank  v.  Lumber  Co.,  32  W.  Va.  357,  9  S.  E.  243, 
3  L.  R.  A.  583 ;   Richardson  v.  Graham,  45  W.  Va.  134,  30  S.  E.  92. 

210  w.  Va.  Code,  c.  54,  §  23. 

211  Id.  c.  53,  §  49. 

212  N.  J.  Corp.  Act,  §  12. 

sis  w.  Va.  Code,  c.  32,  §  89,  as  amended;  Id.  c.  53,  §  46,  as  amended 
by  Laws  1901,  p.  98,  c.  35 ;   N.  J.  Corp.  Act,  §  43. 

21*  W.  Va.  Code,  c.  53,  §  51,  as  amended  by  Laws  1901,  p.  100,  c.  35. 

215  Titus  v.  Railroad  Co.,  37  N.  J.  Law,  98. 

216  W.  Va.  Code,  c.  32,  §  87,  as  amended  by  Laws  1901,  p.  112,  c.  35. 

217  N.  J.  Corp.  Act,  §  114. 

218  N.  J.  P.  L.  1901,  p.  31. 
(36) 


Ch.  1)  SELECTION    OF    DOMICILE.  §  42 

§  41c.  The  liberal  features  mentioned  might  incline  our 
preference  to  West  Virginia ;  but,  on  the  other  hand,  no  stat- 
ute or  decision  is  found  permitting  a  voting  trust  in  that  state, 
and  we  are  confronted  with  the  same  unpleasant  inheritance 
tax  219  which  the  laws  of  Delaware  require,220  making  no  dis- 
tinction between  residents  and  nonresidents;  though  the  tax 
is  not  as  great  as  in  Delaware,  being  only  $2.50  on  each  $100 
of  appraised  value,  whereas  in  Delaware  it  is  $5.  A  choice 
under  these  circumstances  is  somewhat  difficult,  but  the  au- 
thor is  rather  inclined  to  still  favor  New  Jersey  for  the  par- 
ticular purposes  outlined. 

§  42.  We  are  now  brought  to  a  comparison  between  the 
laws  of  New  York  and  Xew  Jersey,  as  between  these  two  states 
must  lie  our  final  choice.  New  York  adopted  its  present  law 
after  that  of  New  Jersey  had  been  for  some  time  in  practical 
operation,  and  borrowed  from  it  many  of  its  salutary  provi- 
sions. Most  of  the  advantages  which  would  inure  under  the 
New  Jersey  law  are  to  be  found  in  New  York  also.  Indeed, 
in  New  York  stock  may  be  issued  for  labor  done,221  which 
is  not  permitted  under  the  New  Jersey  legislation.  On  the 
other  hand,  the  stockholder  in  New  York  is  subjected  to  the 
inheritance  tax  of  that  state.222  which  by  incorporating  in  New 
Jersey  he  might  escape.223  But  while  he  might  escape  the 
inheritance  tax  by  seeking  a  New  Jersey  domicile,  he  would 
expose  the  corporation  to  a  larger  annual  taxation  than  by 
procuring  his  franchise  at  home.224  Moreover,  it  would  seem 
that  the  fees  paid  to  the  state  of  New  Jersey  for  the  privi- 
lege of  incorporating  and  conducting  business  in  the  state 

2i»  W.  Va.  Code,  c.  32,  §  51a  (I). 

220  Del.  Laws,  vol.  13,  c.  390,  §  12. 

221  X.  Y.  S.  C.  L.  §  42. 

222  in  re  Whiting's  Estate,  150  N.  Y.  27,  44  N.  E.  715.  34  L.  R.  A. 
232,  55  Am.  St.  Rep.  640 ;    In  re  Bronson's  Estate,  150  N.  Y.  1,  44  N. 
E.  707,  34  L.  R.  A.  23S?  55  Am.  St.  Rep.  632. 

223  N.  J.  P.  L.  1894,  p.  318. 

224  N.  J.  P.  L.  1901,  p.  31. 

(37) 


§  42a  BUSINESS  CORPORATIONS.  (Ch.  1 

of  New  York  would  be  practically  wasted,  for  the  reason 
that  these  fees  must  be  again  paid  in  the  state  of  New  York  as 
a  condition  of  doing  business  there.  The  New  York  statute 
requires  that  a  foreign  business  corporation  shall  within  thir- 
teen months  after  commencing  its  operations  in  that  state  pay 
to  the  state  treasurer  a  license  fee  of  one-eighth  of  1  per 
centum  of  the  amount  of  capital  stock  employed  by  it  in  New 
York  during  the  first  year  of  its  business  there,  for  the  privi- 
lege of  exercising  its  franchise  in  that  state,225  and  in  addition 
shall  pay  an  annual  tax  similar  to  that  paid  by  domestic  cor- 
porations, to  be  computed  upon  the  basis  of  the  capital  actual- 
ly employed  in  New  York.226  A  comparison  of  the  expenses 
which  must  be  paid  by  way  of  taxation  for  the  first  corporate 
year  between  two  corporations,  both  doing  business  in  New 
York  and  paying  a  6  per  cent,  dividend,  one  of  which  incorpo- 
rates in  New  Jersey  and  one  in  New  York,  is  shown  in  the 
following  tables : 

§  42a.     One  Million  Dollar  Corporation  Organized  under 
New  Jersey  Laws. 

Initial   incorporation  fee $   200  00 

Average  fee  for  maintaining  registered  office  in  New  Jersey       50  00 

Annual  franchise  tax  in  New  Jersey 1,000  00 

License  tax  in  New  York  for  privilege  of  commencing  busi- 
ness       1,250  00 

Annual  franchise  tax  in  New  York 1,500  00 


Total    $4,000  00 

Same  Corporation  Organized  under  New  York  Laws. 

Initial  incorporation  fee $   500  00 

Annual  franchise  tax 1,500  00 


Total $2,000  00 

226  N.  Y.  Tax  Laws  1901,  c.  558,  §  181. 

226  id.  §  182;   People  v.  Roberts,  155  N.  Y.  408,  50  N.  E.  53,  41  L.  R. 
A.  228. 
(38) 


Ch.  1)  SELECTION    OP   DOMICILE. 

During  the  subsequent  years  of  the  existence  of  the  corpora- 
tion there  would  be,  of  course,  no  initial  incorporation  fee. 
The  following  table  shows,  therefore,  the  expense  by  way  of 
taxation  during  every  succeeding  year : 

Same  Corporation  Organized  under  New  Jersey  Laws. 

Average  fee  for  maintaining  registered  office  in  New  Jer- 
sey   $      50  00 

Annual  franchise  tax  in  New  Jersey 1,000  00 

Annual  franchise  tax  in  New  York 1,500  00 


Total $2,550  00 

Same  Corporation  Organized  under  New  York  Laws. 
Annual  franchise  tax $1,500  00 

§  42b.  This  comparison  discloses  that  the  taxation  for  the 
first  year  of  a  New  Jersey  corporation  doing  business  in  New 
York  would  be  twice  as  great  as  for  the  New  York  corporation, 
and  for  every  year  following  almost  twice  as  great.  It  has  been 
admitted  by  the  advocates  of  the  New  Jersey  laws  in  prefer- 
ence to  those  of  New  York  that  the  figures  above  given  are  cor- 
rect if  the  laws  are  strictly  enforced,  but  at  the  same  time  it  is 
claimed  that  statistics  of  the  state  of  New  York  show  that  in 
practice,  because  of  the  indifference  of  the  officials  or  their  ina- 
bility to  levy  the  proper  taxes,  the  New  Jersey  corporation 
would  not  appear  at  such  disadvantage.  The  answer  to  this 
must  be  that  we  are  considering  the  law  as  it  stands  and  as  it 
should  be  enforced,  not  whether  a  given  set  of  officials  have  or 
have  not  been  able  to  gather  together  sufficient  data  up  to  this 
time  to  enable  them  to  carry  the  provisions  of  the  law  into  effect. 
Every  new  law  must  be  administered  with  imperfect  results, 
but  as  the  administration  becomes  more  perfect  it  will  be 
easier  to  hold  all  foreign  corporations  to  a  stricter  compliance 
with  the  requirements  as  set  forth  in  the  statute. 

§  42c.  Aside  from  this,  every  corporation  organizing  else- 
\vhere  than  in  the  state  where  it  is  to  do  business  will  very 

(39) 


§  42d  BUSINESS    CORPORATIONS.  (Ch.  1 

soon  realize  the  stringent  laws  generally  prevailing  relating  to 
attachment.  A  nonresident  is  usually  subject  to.  attachment 
at  the  commencement  of  every  suit  at  law  based  upon  a 
money  demand.227  We  have  already  seen  that  a  corporation 
organized  in  a  state  other  than  that  of  its  business  habitat  is 
classed  as  a  nonresident.228  It  has,  therefore,  resulted  that 
vexatious  attachments  have  been  frequently  sued  out  against 
solvent  corporations,  based  upon  purely  fictitious  demands,  as- 
serted merely  for  the  purpose  of  levying  blackmail  or  forcing 
a  compromise,  to  the  very  great  detriment  of  the  prosperity 
of  these  corporations.  The  force  of  these  remarks  was  demon- 
strated by  the  frequency  of  such  proceedings  during  the  finan- 
cial panic  of  1893.  This  menace  is  sufficient  in  itself  to 
outweigh  many  other  great  advantages  which  might  be  ob- 
tained by  a  foreign  charter. 

§  42d.  Our  conclusion,  therefore,  is  that,  for  the  pur- 
poses suggested  at  the  commencement  of  this  chapter,  the  laws 
of  the  state  of  New  York  are  best  calculated  to  afford  the 
protection  and  privileges  desired. 

§  43.  A  good  deal  of  space  has  been  devoted  to  determin- 
ing the  state  of  the  parentage  of  our  suggested  corporation,  the 
purpose  having  been  to  indicate  in  a  very  general  way  only 
the  line  of  reasoning  to  which  resort  must  be  had  in  order  to 
correctly  solve  the  problem  in  any  given  case.  The  author 
disclaims  any  purpose  to  prefer  the  New  York  laws  over 
those  of  other  jurisdictions  in  any  case  other  than  that  stated 
at  the  outset  of  this  chapter. 

2273  Clark  &  M.  Corp.  p.  233G;  4  Cyc.  430. 
228  Infra,  §  15,  and  note. 
(40) 


Ch.  2)  LNCORPORATORS  AND   SUBSCRIBERS.  §  46 

CHAPTER  H. 

INCORPORATORS  AND  SUBSCRIPTIONS  TO  STOCK. 

§  44.  Who  may  be  Incorporators. 

45.  Nonresidents. 

46.  Corporations. 

47.  Infants. 

48.  Married  Women. 

49.  Aliens. 

50.  Subscriptions  for  Stock. 

51.  Prof.  Collin's  Rules. 

52.  Requisites  of  Subscription  Agreement. 

53.  Uncertainty  in  Subscription  Agreement. 

54.  Form  of  Subscription  Agreement 

WHO  MAY  BE  INCORPORATORS. 

§  44.  At  the  outset  counsel  might  be  called  upon  to  de- 
termine who  may  be  incorporators  under  the  laws  of  the 
particular  jurisdiction  chosen. 

§  45.     Nonresidents. 

In  the  preceding  chapter  we  have  considered  briefly  the 
general  provisions  of  the  various  state  laws  relating  to  the  resi- 
dences of  incorporators. 

§  46.     Corporations. 

\Yhile  a  corporation  is  frequently  permitted  by  statute  to  hold 
stock  in  another  corporation  after  that  other  corporation  has 
once  been  organized,  still  it  has  been  held  that  a  corporation,  in 
the  absence  of  specific  authority  to  that  effect,  cannot  become 
an  incorporator  in  another  company.1  It  cannot  even  become 

i  Nassau  Bank  v.  Jones,  95  N.  Y.  115,  47  Am.  Rep.  14 ;  Central  R. 
Co.  of  New  Jersey  v.  Railroad  Co..  31  N.  J.  Eq.  475 :  Martin  v.  Stove 


§  47  BUSINESS   CORPORATIONS.  (Ch.  2 

a  stockholder  in  another  company  after  incorporation  un- 
less allowed  by  charter  or  governing  statute.2 

§  47.     Infants. 

A  charter  being  in  the  nature  of  a  contract  between  the  in- 
dividual incorporators  and  the  state,3  the  same  reasons  that 
prevent  an  infant  from  entering  into  a  binding  contract  prevent 
him  from  becoming  an  incorporator,4  although,  if  it  should 
happen  that  a  corporation  should  be  organized  with  one  of 
its  incorporators  an  infant,  under  the  ordinary  rule  that  a 
contract  by  an  infant  is  not  void,  but  voidable  only  by  him, 
such  a  corporation  might  still  have  a  legal  existence.5 

§  48.     Married  Women. 

Under  the  common  law,  married  women,  having  no  con- 
tractual power,  could  not  become  incorporators.6  It  is  believed 
that  there  is  now  no  state  in  which  this  common-law  doctrine 
has  not  been  changed  by  statute.  Where  a  married  woman 
is  competent  to  contract  as  a  feme  sole  there  is  no  reason  why 
she  cannot  become  an  incorporator. 

§  49.     Aliens. 

Based  also  upon  the  principles  of  the  law  of  contracts,  alien 
enemies  cannot  become  incorporators ; 7  but  there  is  no  com- 

Co.,  78  111.  App.  105;  McAlester  Mfg.  Co.  v.  Cotton  &  Iron  Co..  128 
Ala.  240,  30  South.  632;  Smith  v.  Railroad  Co.,  8  Ohio  Cir.  Ct.  It. 
583 ;  1  Cook,  Corp.  §  64. 

-  De  La  Vergne  Refrigerating  Machine  Co.  v.  Savings  Inst,  175 
U.  S.  40,  20  Sup.  Ct.  20,  44  L.  Ed.  66. 

s  Dartmouth  College  v.  Woodward,  4  Wheat.  (U.  S.)  518,  4  L.  Ed. 
629. 

<  Phillips  v.  Bridge  Co.,  2  Mete.  (Ky.)  219 :  1  Cook.  Corp.  §  67 ; 
Matter  of  Globe  Mut.  Ben.  Ass'n,  135  N.  Y.  280,  284,  32  N.  E.  122,  17 
L.  R.  A.  547. 

a  In  re  Nassau  Phosphate  Co.,  2  Ch.  Div.  610. 

e  Witters  v.  Sowles  (C.  C.)  38  Fed.  700. 

7  10  Cyc.  165,  and  cases  cited. 
(42) 


Ch.  2)  INCORPORATORS   AND   SUBSCRIBERS.  §  50 

mon-law  restriction  upon  alien  friends  becoming  so,  even  in 
those  jurisdictions  where  the  laws  forbid  the  holding  of  real 
estate  by  aliens,  and  the  only  object  of  the  corporation  is  to 
hold  and  convey  real  property.8  This  is  because  the  corpora- 
tion has  an  entirely  different  legal  entity  from  the  individuals 
organizing  or  holding  stock  in  it.  The  title  to  the  property  is 
in  the  corporation,  which,  if  it  is  not  organized  under  a  for- 
eign law,  is  not  considered  an  alien.  The  result  of  this  prin- 
ciple is  that,  notwithstanding  a  state  may  prohibit  the  holding 
of  real  property  by  aliens,  a  number  of  persons,  all  of  whom 
are  aliens,  might  come  to  that  state  and  take  out  a  charter 
which  would  enable  the  corporation  which  they  organize,  and 
which  they  exclusively  control,  to  acquire  and  hold  such  real 
estate  as  they  see  fit,  and  in  this  way  the  object  of  the  law  may 
be  defeated.  For  this  reason  certain  states  have  enacted  leg- 
islation forbidding  more  than  a  certain  percentage  of  stock  to 
be  held  by  aliens.9 


SUBSCRIPTIONS  FOR  STOCK. 

§  50.  A  formal  subscription  agreement  is  not  necessary 
except  in  those  states  whose  statutes  require  it  as  an  essential 
step  preliminary  to  the  certificate  of  incorporation.10  When 
such  an  agreement  is  requisite,  if  it  is  to  bind  the  signers 
some  care  should  be  exercised  in  its  preparation.  The  authori- 
ties are  not  in  accord  as  to  the  binding  force  of  such  agree- 
ments prior  to  incorporation.  Some  courts  have  sustained  them 
on  the  ground  that  the  promise  of  each  subscriber  is  the  con- 


s  Princeton  Min.  Co.  v.  First  Nat.  Bank,  7  Mont  530,  19  Pac.  210. 

»  Code  Iowa,  §  2889 ;  Rev.  St.  Mo.  §  4765 ;  Const.  Wash.  art.  2,  § 
33 ;  State  v.  Hudson  Land  Co.  (Wash.)  52  Pac.  574,  40  L.  R.  A.  430 ; 
St.  Wis.  1898,  §  2200a. 

10  Manchester  St  Ry.  v.  Williams,  71  N.  H.  312,  52  Atl.  461 ;  Park- 
hurst  v.  Railroad  Co.,  102  111.  App.  507. 

(43) 


§  51  BUSINESS    CORPORATIONS.  (Ch.  2 

sideration  for  the  promises  of  each  of  the  others.11     Other 
courts  have  taken  the  opposite  view.12 

§  51.     Prof.  Collin's  Rules. 

The  following  rules  laid  down  by  Prof.  Collin,  of  the  Cor- 
nell Law  School,  it  is  believed  state  correctly  the  law  generally 
prevailing : 

§  51a.  "A  preliminary  agreement  to  form  a  corporation 
and  take  stock  therein  is  not  a  contract  by  the  subscribers  with 
each  other,  and  cannot  be  enforced  by  one  or  more  against 
any  other,  but  only  by  the  corporation." 

§  51b.  "Such  an  agreement,  not  made  as  a  step  authorized 
by  statute  in  the  process  of  forming  the  corporation,  is  a 
mere  offer  to  the  corporation  not  yet  in  existence,  and  is 
revocable  by  any  subscriber  until  the  birth  of  the  corporation, 
which  operates  as  an  acceptance  of  the  offer,  and  thereafter 
the  subscription,  if  not  previously  revoked,  is  irrevocable,  and 
may  be  enforced  by  the  corporation." 

§  51c.  "Such  an  agreement,  made  as  a  step  authorized  by 
statute  in  the  process  of  forming  the  corporation,  is  made  valid 
by  the  statute,  and  is  binding  upon  each  subscriber  from  the 
time  of  signing,  and  is  irrevocable  thereafter,  but  can  be  en- 
forced only  by  the  corporation." 

11  Higert  v.  Trustees,  53  Ind.  326;   Conrad  v.  La  Rue,  52  Mich.  83, 
17  N.  W.  706;    Lathrop  v.  Knapp,  27  Wis.  214;    Trustees  of  Troy 
Conference  Academy   v.    Nelson,  24   Vt.   189 ;    Christian   College  v. 
Hendley,  49  Cal.  347. 

12  Cottage  St.  M.  E.  Church  v.  Kendall,  121  Mass.  528,  23  Am.  Rep. 
286;    Presbyterian  Church  of  Albany  v.   Cooper,  112  N.  Y.  517,  20 
N.  E.  352,  3  L.  R.  A.  468,  8  Am.  St.  Rep.  767;    Hamilton  College  v. 
Stewart,  1  N.  Y.  581;    Twenty-Third  St.  Baptist  Church  v.  Cornell, 
117  N.  Y.  601,  23  N.  E.  177,  6  L.  R.  A.  807;    Richelieu  Hotel  Co.  v. 
Encampment  Co.,  140  111.  248,  29  N.  E.  1044.  33  Am.  St.  Rep.  234: 
Kinsley  v.  Encampment  Co.,  41  111.  App.  259:   Ohio  Wesleyan  Female 
College  v.  Higgins,  16  Ohio  St.  20:    Johnson  v.  University,  41  Ohio 
St.  527;    Whitsitt  v.  Trustees,  110  111.  125;    McClure  v.  Wilson,  43 
111.  356. 

(44) 


Cll.  2)  INCORPORATORS   AND   SUBSCRIBERS.  §  52 

§  5  Id.  "An  agreement  to  pay  money  to  trustees,  to  be  by 
them  paid  to  a  corporation  thereafter  to  be  created,  the  trus- 
tees to  return  to  the  subscribers  stock  in  the  corporation  accord- 
ingly, is  a  valid  contract  between  the  subscribers  and  the  trus- 
tees." 

§  51e.  "The  distinction  made  between  a  present  subscrip- 
tion and  an  agreement  to  subscribe  to  the  stock  of  a  corpora- 
tion thereafter  to  be  created  is  unsound  in  principle,  and 
disappears  as  mere  dicta  upon  a  thorough  sifting  of  the  cases." 

§  51f.  "The  damages  recoverable  by  the  corporation  upon 
a  subscription  is  the  amount  of  the  subscription;  and  all  dis- 
cussion of  any  other  measure  of  damages,  such  as  difference 
between  par  and  market  value  of  stock  subscribed,  arises  from 
a  misconception  of  the  situation,  and  disappears  from  the 
net  result  of  the  authorities."  1S 

§  52.     Requisites  of  Subscription  Agreement. 

In  those  states  where  such  agreements  have  not  been  made 
valid  by  statute,  it  would  seem  that,  in  order  to  prevent  the 
possibility  of  a  subscriber  legally  withdrawing  prior  to  the  or- 
ganization of  the  company,  the  agreement  should  be  signed 
also  by  the  promoters  or  trustees,  with  a  covenant  on  their 
part  to  endeavor  to  obtain  subscriptions  up  to  a  certain  amount, 
and  to  organize  the  corporation  as  speedily  as  possible,  and 
when  organized  to  deliver  to  the  subscribers  stock  in  the  com- 
pany to  the  amount  subscribed,  in  which  event  their  promise 
would  constitute  a  consideration  for  the  promise  of  each  of  the 
subscribers.14  In  case  the  corporation  has  already  been  or- 
ganized, and  is  thus  legally  competent  to  contract,  a  mere  sub- 
scription agreement,  without  an}-  covenant  upon  the  part  of 
the  company,  if  under  seal,  would  be  valid  in  those  jurisdictions 

i 

is  1  Cook,  Corp.  §  75. 
"Clark  &  M.  Corp.  §  444. 

(45) 


§  53  BUSINESS    CORPORATIONS.  (Ch.  2 

where  the  common-law  distinction  between  scaled  and  unsealed 
instruments  prevails.16 

§  53.     Uncertainty  in  Subscription  Agreement. 

In  this  connection  attention  should  be  called  to  a  defect  com- 
mon to  many  subscription  agreements  otherwise  beyond  criti- 
cism. This  consists  in  the  failure  to  have  them  recite  the  par 
value  of  the  stock  for  which  the  subscription  is  made.  Fre- 
quently such  documents  contain  a  promise  to  subscribe  for  a 
certain  number  of  the  shares  of  the  capital  stock  of  a  given  cor- 
poration with  a  stated  capital,  without  specifying  into  how 
many  shares  that  capital  is  to  be  divided  or  the  par  value  of 
each  share.  Such  a  contract  would,  of  course,  be  void  for  un- 
certainty, it  being  impossible  to  determine  the  extent  of  the 
subscription.16  Prudence  would  dictate  that  all  of  the  features 
of  the  proposed  corporation  which  are  considered  of  particular 
moment  should  be  plainly  stated  in  the  subscription  agreement. 

§  54.     Form  of  Subscription  Agreement. 

Whereas,  it  is  proposed  to  organize  under  the  laws  of  » 

a  corporation  to  be  styled  (fill  in  proposed  name),  or  to  bear  such 
other  name  as  may  hereafter  be  designated  by  the  parties  interested 
therein,  the  object  of  such  corporation  to  be  to  transact  the  business 
of  (fill  in  generally  the  nature  of  the  business  without  specifying  too 
minutely),  with  power  to  do  all  things  which  may  seem  calculated, 
directly  or  indirectly,  to  promote  the  business  interests  of  said 
company ;  and 

Whereas,  it  is  proposed  that  said  company  shall  have  a  capital 

stock  of ($ )  dollars,  to  be  divided  into  (fill 

in  number  of  preferred  shares)  shares  of  preferred  stock  and  (fill  in 
number  of  common  shares)  shares  of  common  stock,  of  the  par  value 

of  ($ )  dollars  each,  and  the  undersigned 

parties  each  desire  to  become  holders  of  stock  in  said  corporation: 

Now,  therefore,  we,  the  undersigned,  in  consideration  of  our  mutual 
promises,  do  severally  agree  to  and  with  each  other,  and  with  (fill  in 

IB  id.  §§  440,  451c,  and  cases  cited. 

i«  Nernaha  Coal  &  Mining  Co.  v.  Little,  54  Kan.  424.  38  Pac.  483; 
Loutsenhizer  v.  Milling  Co.,  5  Colo.  App.  479,  39  Pac.  66. 

(40) 


Ch.  2)  INCORPORATORS   AND   SUBSCRIBERS.  §  54 

name  of  promoter  or  of  trustees),  who  is  actively  interested  in  the 
formation  of  said  corporation,  to  take  the  number  and  kind  of  shares 
of  stock  in  said  corporation  set  opposite  our  respective  names  as 

signed  hereto,  and  to  pay  therefor  the  sum  of ($ ) 

dollars  per  share,  such  payments  to  be  made  at  (fill  in  place  of  pay- 
ment), on  (state  the  time  for  making  same,  and  whether  they  are  to 
be  in  cash  or  in  installments,  and  when  these  installments  are  to  be 
called  for) ;  it  being  distinctly  understood  that  upon  payment  in  full 
for  such  shares  we  or  our  personal  representatives  or  assigns  are 
respectively  to  receive  certificates  of  stock  in  said  corporation  to  the 
amount  of  our  subscriptions,  and  that  meanwhile  until  payment  shall 
be  made  in  full  said  corporation  shall  issue  to  us  its  receipts  for  all 
payments  made. 

This  agreement  is  conditioned  upon  the  said  (name  of  promoter 
or  trustees)  procuring  other  bona  fide  subscriptions  of  at  least 
($ )  dollars  to  the  said  capital  stock. 

In  testimony  whereof  we  have  hereunto  set  our  hands  and  affixed 
our  seals  at ,  this day  of ,  A.  D.  19. . . 

Number  of  Kind  of 

Name.                                  Residence.                Shares.  Shares. 

John  Doe,          [Seal.]          New  York,              100  shares,  Preferred. 

Richard  Roe,     [Seal.]          Philadelphia,            "        "  Common, 

etc.              [Seal.]                 etc.                          etc.  etc. 

In  consideration  of  the  foregoing  subscriptions  and  each  of  them  I 
(name  of  promoter  or  of  trustees)  hereby  agree  to  and  with  the  said 
subscribers  and  each  of  them  to  use  my  best  endeavors  to  obtain 
subscriptions  for  the  stock  of  said  company  to  the  extent  of  at  least 

($ )  dollars,  and  to  perfect  the  organization 

of  said  corporation  as  speedily  as  possible ;  and  when  organized  to 
see  that  stock  is  delivered  to  said  subscribers  and  each  of  them  to 
the  amount  of  their  respective  subscriptions. 

In  testimony  whereof  I  have  hereunto  set  my  hand  and  affixed  my 

seal  at ,  this day  of ,  A.  D.  19. .. 

A.  Promoter.  [Seal.] 

(47) 


55  BUSINESS   CORPORATIONS.  (Cll.  3 

CHAPTER  HI. 

CERTIFICATE  OF  INCORPORATION. 

§  55.  How  Corporate  Franchise  may  be  Conferred. 

56.  General  Enabling  Statutes. 

57.  The  Charter. 

58.  Source  of  Powers. 

60.  Contents  of  Certificate. 

61.  Governing  Principles. 

62.  Name. 

63.  Use  of  Word  "Incorporated." 

64.  Objects. 
66.  Powers. 

68.  To  Conduct  Business  in  Other  States. 

69.  To  Create  Voting  Trusts. 

70.  To  Cumulate  Votes. 

71.  Directors  Disposing  of  Entire  Property. 

72.  Holding  Directors'  Meeting  Outside  of  State. 

73.  Action  of  Directors  Outside  of  Meeting. 

74.  Power  to  Regulate  Inspection  of  Records. 

75.  Directors  Making  and  Amending  By-Laws. 

76.  Executive  Committee. 

77.  Where  Powers  should  be  Set  Forth. 

78.  Capital  Stock. 

79.  Names  and  Residences  of  Incorporators. 

80.  Number  of  Shares  Subscribed. 

81.  Existence  of  Corporation. 

82.  Signatures. 

S3.     Acknowledgment. 

84.  Forms. 

84b.  Charter  United  States  Steel  Corporation. 

S4c.  Object  Clause  for  Mercantile  Business. 

84d.  Object  Clause  for  Department  Store. 

84e.  Object  Clause  for  Contracting  Company. 

84f.  Object  Clause  for  Mining  Company. 

84g.  Object  Clause  for  Apartment  House  Company. 

85.  Clause  Authorizing  Executive  Committee. 
8oa.  Clause  Authorizing  Action  Out  of  Meeting. 
8ob.  Clause  Authorizing  Directors  to  Sell  Business. 
85c.  Clause  Authorizing  Cumulative  Voting. 

(48) 


Cll.  3)  CERTIFICATE   OF    INCORPORATION.  §  57 

§  55.     How  Corporate  Franchise  may  be  Conferred. 

The  corporate  franchise  may  be  conferred  either  by  special 
legislation  to  suit  the  individual  case,  or  by  general  legislation 
under  which  any  persons  desiring  to  obtain  the  corporate  privi- 
lege may  associate  themselves  together  and  secure  this  privi- 
lege as  a  matter  of  right. 

§  56.     General  Enabling  Statutes. 

There  are  two  distinct  methods  recognized  in  the  United 
States  under  general  enabling  statutes  by  which  corporations 
may  be  organized :  First,  by  application  to  a  judicial  tribunal 
which  grants  the  charter;  and,  second,  by  a  formal  writ- 
ten agreement  signed  by  the  incorporators,  which,  upon  be- 
ing recorded  in  some  designated  office  in  the  state,  confers  at 
once  the  right  to  be  a  corporation.  The  first  method  referred 
to  is  now  so  little  in  vogue  that  it  need  not  be  specially  consid- 
ered. Whenever  it  must  be  resorted  to,  the  general  prin- 
ciples applicable  to  the  second  method  will  also  govern  much 
of  the  procedure  under  the  first. 

§  57.     The  Charter. 

Under  the  second  method  the  charter  may  consist  either  of 
the  original  agreement  of  incorporation  signed  by  the  various 
parties  interested,  which  is  now  the  general  rule,1  or  it  may 
consist  of  a  certificate  issued  by  some  ministerial  officer  under 
the  seal  of  the  state,  reciting  that  the  incorporators  have  filed 
such  an  agreement,  and  have  thereupon  become  a  body  cor- 
porate.2 In  either  event  the  rights  and  privileges  of  the  cor- 
poration are  to  be  governed  by  this  original  agreement  sub- 
scribed by  the  parties,  in  so  far  as  it  is  not  inconsistent  with 
the  law.3 

1  10  Cyc.  222. 

2  Id. 

s  Id. ;  Clark  &  M.  Corp.  §  127 ;  O'Brien  v.  Cummings,  13  Mo.  App. 
197. 

CLEPH.  Bus.  CORP. — 4  (49) 


§  58  BUSINESS   CORPORATIONS.  (Ch.  3 

§  58.     Source  of  Powers. 

In  order  to  determine  the  powers  of  a  given  corporation, 
resort  must  first  be  had  to  the  Constitution  of  the  state 
creating  it;  second,  to  the -general  law  passed  pursuant  to 
the  Constitution;  and,  third,  to  the  charter  itself.  If  the 
statute  permitting  the  organization  of  corporations  purports  to 
confer  broader  powers  than  the  Constitution  warrants,  the 
statute  is  to  that  extent  unconstitutional  and  void.  If  the  char- 
ter contains  a  statement  of  broader  powers  than  are  permitted 
by  the  Constitution  or  laws  of  the  commonwealth,  the  charter 
is  to  that  extent  invalid.4  It  is  not  meant  by  this  assertion  that 
the  corporation  has  not  a  legal  existence,  but  merely  that  the 
excessive  powers  enumerated  will  be  rejected  as  surplusage.5 

§  59.  Assuming  that  the  certificate  of  incorporation  com- 
plies with  both  the  Constitution  and  the  general  statute,  this 
is  the  instrument  to  which  resort  must  always  be  had  pri- 
marily in  order  to  determine  the  corporate  powers.  Hence  the 
necessity  for  great  care  in  framing  this  document.8 

CONTENTS  OF  CERTIFICATE. 

§  60.  The  various  state  statutes  prescribe  with  detail  what 
must  be  stated  in  the  certificate  of  incorporation.  All  of  the 
required  information  should  be  incorporated  in  it.  In  addition, 
it  is  usually  permissible  to  insert  such  other  provisions,  not 
contrary  to  law  or  public  policy,  as  may  be  desired  to  govern 
the  rights  of  the  stockholders  among  themselves.  No  objection 
can  reasonably  be  made  to  doing  this.  Each  stockholder  pur- 
chases his  holdings  with  actual  or  constructive  notice  of  the 

*10  Cyc.  1099;  City  of  Aurora  v.  West,  9  Ind.  74;  Republican 
Mountain  Silver  Mines  v.  Brown,  58  Fed.  644,  7  C.  C.  A.  412,  24  L. 
R.  A.  776 ;  1  Cook,  Corp.  §§  2,  4. 

5  1  Cook,  Corp.  §  4,  and  cases  cited ;  Albright  v.  Association,  102 
Pa.  411. 

e  Thomas  v.  Railroad  Co.,  101  U.  S.  71,  23  L.  Ed.  950 ;    Central 
Tnmsp.  Co.  v.  Car  Co.,  139  U.  S.  24,  11  Sup.  Ct.  478.  35  L.  Ed.  55. 
(50) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  g  62 

extent  of  the  powers  of  the  company,  and  the  manner  in 
which  those  powers  are  to  be  exercised,  and  he  can  hardly  be 
heard  to  object,  therefore,  to  any  of  the  stipulations  to  which, 
by  becoming  a  stockholder,  he  has  voluntarily  made  himself  a 
party.1 

§  61.     Governing  Principles. 

Generally  the  statutes  specify  so  plainly  what  should  be  in- 
serted that  little  is  needed  by  way  of  explanation  to  make  them 
clearer.  There  are,  however,  some  principles  of  law  which 
must  be  borne  in  mind  in  drafting  every  charter,  and  to  a  few 
of  these  principles  a  brief  allusion  will  be  made. 

§  62.     Name. 

In  many  states  the  appropriation  of  a  name  already  assumed 
by  another  domestic  corporation  is  forbidden  by  statute; 
but,  aside  from  this,  it  is  a  general  principle  of  law  that  a  body 
which  first  acquires  the  right  to  use  a  particular  corporate 
name  will  be  protected  in  the  use  of  that  name  as  against 
any  other  body  incorporating  at  a  later  period  in  the  same 
state,  and  assuming  the  same  name.8  This  is  simply  a  particu- 
lar expression  of  the  broad  equity  doctrine  that  unfair  compe- 
tition in  business  will  be  enjoined  by  the  courts.  It  has  been 
held  that,  where  there  was  already  in  existence  a  corporation 
styled  "Kansas  City  Real  Estate  &  Stock  Exchange,"  registra- 

"  Eastern  Plank  Road  Co.  v.  Vaughan,  14  N.  Y.  546 ;  Heck  v  Mc- 
Eweu,  12  Lea  (Tenn.)  97;  Rochester  Ins.  Co.  v.  Martin,  13  Minn.  59 
(Gil.  54);  Bates  v.  Wilson,  14  Colo.  140,  24  Pac.  99;  Swartout  v. 
Railroad  Co.,  24  Mich.  389:  Bent  v.  Underdown,  156  Ind.  516,  60 
X.  E.  307;  Heald  v.  Owen,  79  Iowa,  23,  44  N.  W.  210;  3  Clark  & 
M.  Priv.  Corp.  §§  1933,  1955,  1957,  1962,  2074-2076 :  Tayl.  Priv.  Corp. 
§§  187,  448,  541 ;  Kean  v.  Johnson,  9  N.  J.  Eq.  401 ;  Loewenthal  v. 
Reclaiming  Co.,  52  N.  J.  Eq.  440,  28  Atl.  454  ;  Kent  v.  Mining  Co., 
78  N.  Y.  159 ;  Weatherly  v.  Society,  76  Ala.  567 ;  Cummings  v.  Web- 
ster, 43  Me.  192;  Union  Bank  of  Louisiana  v.  Guice,  2  La.  Ann. 
249 ;  Ernest  v.  Nicholls,  6  H.  L.  Cas.  401 ;  2  Cook,  Corp.  §  493. 

8  1  Cook,  Corp.  §  15,  and  cases  cited ;  10  Cyc.  150,  and  cases  cited. 

(51) 


§  63  BUSINESS   CORPORATIONS.  (Ch.  3 

tion  should  be  refused  a  new  corporation  under  the  name  of 
"The  Kansas  City  Real  Estate  Exchange."  9  So,  too,  a  mere 
transposition  of  words  in  the  name  has  been  held  not  to  en- 
title a  name  so  transposed  to  registration.10  Authority  is  also 
found  for  the  proposition  that  a  new  corporation  cannot  adopt 
the  same  name  as  an  old  one,  with  the  mere  addition  of  the 
place  where  the  business  is  to  be  carried  on.11 

§  63.     Use  of  Word  "Incorporated." 

The  statutes  sometimes  require  the  use  of  the  word  "in- 
corporated," either  in  full  or  abbreviated,  or  the  words  "a  cor- 
poration," after  the  name,  wherever -the  name  is  displayed  on 
printed  matter  or  otherwise ;  and,  as  a  penalty  for  noncom- 
pliance,  the  stockholders  are  held  liable  as  partners.12- 

§  64.     Objects. 

Two  views  have  been  taken  by  corporation  lawyers  with 
regard  to  stating  in  the  charter  the  objects  of  the  corpora- 
tion. Some  counsel  prefer  to  set  forth  the  objects  in  the 
most  general  terms  possible,  leaving  the  particular  powers  to 
be  exercised  to  implication,  upon  the  ground  that  every  corpo- 
ration has  an  implied  power  to  do  whatever  is  necessary  to 
carry  into  effect  the  purposes  of  its  creation,  unless  the  doing  of 
the  particular  thing  is  prohibited  by  law  or  by  the  charter.1? 
In  construing  the  doctrine  of  implied  powers,  the  courts  have 

»  State  v.  McGrath,  92  Mo.  355,  5  S.  W.  29. 

10  Altoona  Gas  Co.  v.  Gas  Co.,  17  Pa.  Co.  Ct.  R.  6G2. 

11  In  re  Bradley  Fertilizer  Co.,  19  Pa.  Co.  Ct.  R.  271 ;    Glucose 
Sugar  Refining  Co.  v.  Sugar  Refining  Co.  (N.  J.  Ch.)  22  N.  J.  Law 
J.  147. 

12  See  chapter  1,  §  2,  Va.  Corp.  Law  [2  Va.  Code  1904,  p.  523,  § 
1105a,  subd.  2J ;  Gen.  Corp.  Law  Nev.  1903,  §  4 ;   Gen.  Corp.  Law  Del. 
1901,  §  5 ;    Conn.  Corp.  Law  1903,  §  2. 

13  Blanchard's  Gun-Stock  Turning  Factory  v.  Warner,  1  Blatchf. 
258,  Fed.  Cas.  No.  1,521 ;    1  Clark  &  M.  Corp.  §  128 ;    10  Cyc.  1097, 
and  cases  cited. 

(52) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  65c 

decided  that  the  acts  which  are  authorized  are  not  merely 
those  which  are  indispensable  and  necessary  to  carry  into 
effect  the  powers  expressly  recognized,  but  comprise  all  such 
as  are  appropriate,  convenient,  and  suitable  to  this  end.  The 
very  general  expression  of  an  object  will  therefore  frequently 
be  amply  sufficient  for  all  of  the  practical  needs  of  the  cor- 
poration. There  is  a  danger  in  being  more  specific,  in  view  of 
the  doctrine  that  "inclusio  unius  est  exclusio  alterius."  14 

§  65.  On  the  other  hand,  other  counsel,  quite  as  learned, 
consider  that  it  is  dangerous  to  leave  to  implication  any  of 
the  powers  of  a  corporation,  or,  if  not  dangerous,  for  the  bene- 
fit of  the  investing  public  it  is  better  to  express  them  in  detail, 
so  that  a  glance  at  the  charter  may  determine  absolutely  and 
beyond  question  whether  or  not  a  particular  act  is  authorized. 
The  best  expression  of  this  view  is  found  in  the  language 
of  Mr.  Dill,  the  eminent  corporation  lawyer,  who  says  in  his 
treatise  on  the  Corporation  Law  of  New  Jersey,  at  page  21 : 

§  65a.  "This  being  the  important  part  of  the  certificate 
of  incorporation,  great  care  should  be  taken  that  the  objects 
and  purposes  of  the  company  are  stated  in  the  fullest  and  clear- 
est manner  possible,  because  the  company  cannot  undertake 
any  business  not  authorized  by  its  charter,  and  not  even  the 
fullest  sanction  given  by  the  shareholders  will  make  valid  an 
act  which  is  outside  the  powers  of  the  company.  Directors  un- 
dertaking any  such  business  may  become  personally  liable  for 
loss,  and  great  inconvenience  follows  from  companies  having 
too  limited  powers.  It  is  often  questioned  how  far  it  is  neces- 
sary to  detail  in  extenso  in  the  certificate  of  incorporation  the 
powers  of  the  company.  The  answer  is  plain. 

§  65b.  "The  balance  of  disadvantage  decidedly  attaches  to 
too  narrowly  defined  objects. 

§  65c.  "It  is  easier  to  compress,  so  to  speak,  the  business 
of  a  company  within  the  limits  of  large  objects  and  broad  pow- 

i*  Thomas  v.  Railroad  Co..  101  U.  S.  71,  25  L.  Ed.  950. 

(53) 


§  65d  BUSINESS    CORPORATIONS.  (Ch.  3 

ers,  than  to  develop  business  by  extension  in  the  face  of  nar- 
rowly defined  objects.  It  is  better  to  give  latitude  to  the  ob- 
jects and  powers  as  contained  in  the  certificate  of  incorpora- 
tion, and  to  limit  the  powers  of  directors  by  the  by-laws,  than 
to  run  the  risk  of  the  subsequent  insertion  in  the  by-laws  or  in 
the  minutes  of  the  board  of  directors  of  a  provision  intended  to 
meet  some  pressing  requirements  of  the  business,  which  pro- 
vision may  be  found  absolutely  worthless  because  of  varia- 
tions from  the  terms  of  the  certificate  of  incorporation. 

§  65d.  "It  is  customary  to  insert  general  words,  such  as, 
'In  general,  to  carry  on  any  other  business,  whether  manu- 
facturing or  otherwise.'  But  it  must  be  understood  that  the 
courts  limit  such  words  to  operations  of  a  nature  similar  to 
the  business  previously  mentioned,  and  will  not  include  any 
wholly  fresh  business." 

POWERS. 

§  66.  In  order  to  prevent  the  application  of  the  principle 
above  referred  to,15  that  the  inclusion  of  certain  powers  means 
the  exclusion  of  others,  it  is  usual  among  those  who  draft 
certificates  of  incorporation,  when  stating  the  powers  which 
the  company  may  exercise  in  addition  to  the  previously  stated 
objects,  to  preface  such  enumeration  with  the  following  words, 
or  those  substantially  similar:  "In  furtherance  of,  and  not  in 
limitation  of,  the  general  powers  conferred  by  law,  and  of 
the  objects  and  purposes  as  hereinabove  stated,  it  is  hereby  ex- 
pressly provided  that  the  company  shall  also  have  the  follow- 
ing powers ;  that  is  to  say,"  etc. 

§  67.  Many  of  the  powers  usually  inserted  after  this  lan- 
guage are  merely  what  the  law  would  confer  without  any  ex- 
press words.  Some  of  the  clauses,  however,  frequently  con- 
tained in  this  portion  of  corporation  charters,  deserve  consid- 
eration. 

IB  Supra,  §  64. 
(54) 


Cll.  3)  CERTIFICATE    OF    INCORPORATION.  8  TO 

§  68.     To  Conduct  Business  in  Other  States. 

Some  of  the  early  statutes  in  certain  portions  of  this  coun- 
try seemed,  at  least  by  implication,  to  require  that,  if  a  corpo- 
ration should  desire  to  do  business  outside  of  the  state  of  its 
creation,  that  power  should  be  stated  in  its  charter.  Hence  the 
practice  sprung  up,  and  has  since  continued,  of  inserting  in  the 
certificate  of  incorporation  a  clause  in  terms  permitting  it  to 
conduct  its  business  and  hold  and  convey  property  of  every  de- 
scription elsewhere  than  in  the  state  of  its  birth.  This  clause 
is  probably  a  prudent  one,  but  it  should  not  be  so  worded  as  to 
exclude  the  po\ver  of  doing  these  things  within  the  parent 
state,  for  then  the  corporation  would  be  declared  illegal  ab 
initio  under  the  principle  heretofore  referred  to.16 

§  69.     To  Create  Voting  Trusts. 

The  legality  of  voting  trusts  will  be  discussed  in  another 
portion  of  this  work.17  From  the  tenor  of  certain  judicial  ut- 
terances, it  is  believed  that  a  voting  trust  which  might  other- 
wise be  declared  illegal  would  be  sustained  if  the  charter  con- 
tains a  provision  authorizing  it.18  In  some  states  voting  trusts 
are  made  legal  by  statute,  whether  referred  to  in  the  charter 
or  not,19  and  in  still  others  they  have  been  sustained  by  the 
courts  without  aid  either  from  the  statute  or  charter.20 

§  70.     To  Cumulate  Votes. 

In  some  states,  as  in  New  York  21  and  New  Jersey,22  the 
law  requires  the  provision  permitting  cumulative  voting  to 
be  inserted  in  the  charter,  if  this  right  is  to  be  exercised. 

is  Laud  Grant  Ry.  &  Trust  Co.  v.  Coffey  County,  6  Kan.  245. 

IT  Infra,  §  213. 

is  White  v.  Tire  Co.,  52  X.  J.  Eq.  178.  28  Atl.  75. 

is  Pa.  Act  May  7,  1889;    N.  Y.  Inc.  Law  1901,  c.  355. 

20  infra.  §§  213a-213b. 

21  N.  Y.  G.  C.  L.  §  20. 

22  N.  j.  Paul.  L.  1900,  p.  418. 

(55) 


§  71  BUSINESS   CORPORATIONS.  (Ch.  3 

§  71.     Directors  Disposing  of  Entire  Property. 

At  common  law,  if  the  board  of  directors  should  desire  to  di- 
vert the  entire  property  of  a  perfectly  solvent  company  from 
the  business  for  which  it  was  organized,  or  to  dispose  of  it, 
a  minority  of  the  stockholders  might  prevent  this.23  There- 
fore, where  it  is  desired  to  lodge  a  greater  degree  of  power  in 
the  directors  than  would  otherwise  exist,  it  is  customary  in  the 
charter  to  specify  these  powers,  and  among  them  the  right  to 
dispose  of  the  entire  property  of  the  company  upon  the  con- 
ditions and  in  the  manner  specifically  appearing  in  the  cer- 
tificate of  incorporation.  The  charter  being  considered  in  the 
light  of  a  contract  between  the  stockholders,24  such  a  provision 
would  place  the  minority  in  a  position  from  which  it  would  be 
very  difficult  to  successfully  assail  the  action  of  the  directors 
in  so  disposing  of  the  assets. 

§  72.     Holding  Directors'  Meetings  Outside  of  the  State. 

In  certain  states  this  is  expressly  permitted  by  statute.25 
In  others  it  is  only  permitted  by  statute  where  the  power  is 
stated  in  the  charter  or  by-laws.26  Where  the  statute  is  silent 
on  the  subject,  the  common-law  rule  governs.  What  this  rule 
is,  is  somewhat  difficult  to  decide  from  the  adjudged  cases. 
Mr.  Cook,  in  his  treatise  on  Corporation  Law,  lays  down  the 
law  as  follows :  "  "A  meeting  of  the  directors  of  a  corpora- 
tion may  be  held  outside  of  the  state  creating  the  corporation, 
unless  the  charter  or  a  statute  expressly  forbids  such  a  meet- 
ing. The  acts,  proceedings,  and  contracts  of  a  meeting  of  the 

23  See  Chicago  City  R.  Co.  v.  Allerton,  18  Wall.  (U.  S.)  233,  21  L. 
Ed.  902. 

24  See  supra,  §  60,  and  note. 

25  Rev.  St.  Me.  1904,  c.  47,  §  19;    B.  C.  L.  Mass.  1903,  c.  437,  §  25; 
N.  Y.  Laws  1904,  c.  446,  §  2 ;    Gen.  Inc.  Act  Va.  c.  5,  §  5  [1  Va.  Code 
1904,  p.  558,  §  1105e,  subd.  5] ;    W.  Va.  Code,  c.  54,  §  23 ;    Rev.  Civ. 
Code  S.  D.  §  786 ;    Nev.  Gen.  Inc.  Law  1903,  §§  14,  23. 

2«N.  J.  Corp.  Act,  §  44;    Del.  Corp.  Law    1901,  §  32;    Civ.  Code 
Porto  Rico,  tit  2,  c.  1,  §  41. 
2?  2  Cook,  Corp.  §  713a. 
(56) 


Ch.  3)  CERTIFICATE    OF   INCORPORATION.  §  72b 

board  of  directors  held  outside  of  the  state  are  valid  and  en- 
forceable." The  late  Judge  Seymour  D.  Thompson,  in  his 
latest  treatise  on  Corporations,  contained  in  10  Cyclopedia  of 
Law  &  Procedure,  states  the  rule  to  be  diametrically  opposite : 
"In  the  absence  of  statutory  authorization  for  a  different 
course,  no  valid  meeting  of  directors  can  be  held  outside  the 
'state  under  whose  legislation  the  corporation  has  been  cre- 
ated." 28 

§  ?2a.  In  the  case  of  Galveston,  H.  &  H.  R.  Co.  v.  Cow- 
drey  (1870)  11  Wall.  459,  20  L.  Ed.  199,  the  Supreme  Court 
of  the  United  States  held  that  bona  fide  holders  of  railroad 
bonds  cannot  be  prejudiced  by  the  fact  that  the  mortgage  by 
which  they  were  secured  was  authorized  at  a  meeting  of  the 
board  of  directors  held  outside  of  the  state  which  conferred 
the  charter  privileges.  The  court  uses  the  following  lan- 
guage : 29 

§  72b.  "No  doubt,  it  may  be  true  in  many  cases  that  the 
extraterritorial  acts  of  directors  would  be  held  void,  as  in  the 
case  cited  from  the  14th  New  Jersey  Chancery  Reports,  383,* 
where  a  set  of  directors  of  a  New  Jersey  corporation  met  in 
Philadelphia,  against  a  positive  prohibitory  statute  of  New 
Jersey,  and  improperly  voted  themselves  certain  shares  of  stock. 
And  other  cases  might  be  put  where  their  acts  would  be  held 
void  without  a  prohibitory  statute,  and  it  is  generally  true  that  a 
corporation  exists  only  within  the  territory  of  the  jurisdiction 
that  created  it.  But  it  is  well  settled  that  a  corporation  may, 
by  its  agents,  make  contracts  and  transact  business  in  another 
territory,  and  may  sue  and  be  sued  therein.  It  may  hold  land  in 
another  territory  so  long  as  the  local  authorities  do  not  object. 
And  we  see  no  reason  why  it  should  not  be  estopped  by  the 
action  of  its  directors  in  another  territory,  when  the  action  is 
the  basis  of  negotiations  by  which  third  parties  have  bona 
fide  parted  with  their  money,  and  the  company  has  received 
the  benefits  of  the  transaction.  A  contrary  doctrine  would 

28  Page  783.  29  Page  476.  *  Hilles  v.  Parrish. 

(57) 


§  720  BUSINESS   CORPORATIONS.  (Ch.  3 

authorize  a  company  to  take  advantage  of  its  own  wrong,  and 
would  seriously  impair  the  negotiability  and  value  of  such  se- 
curities." 

§  72c.  This  opinion  hints  at  a  dis'inction  which  seems  to 
be  drawn  by  some  of  the  cases  between  ''constituent  acts"  and 
mere  ministerial  acts,  with  respect  to  which  the  directors  are 
deemed  to  be  ordinary  agents  of  the  corporation ;  the  former, 
in  the  absence  of  an  enabling  statute,  being  required  to  be 
performed  within  the  parent  state,  while  the  latter  may  be  done 
anywhere.30  Instances  of  the  latter  class  of  acts  would  be 
appointing  a  secretary,31  or  conferring  power  upon  an  agent 
to  execute  a  deed.32  As  to  this  class  of  acts,  there  can  be  no 
question  but  that,  even  in  the  absence  of  statutory  authority, 
if  the  power  to  directors  to  meet  outside  of  the  state  is  con- 
tained in  the  charter,  no  one  can  be  heard  to  raise  the  objec- 
tion.33 As  to  the  former  class,  while  certain  decisions  have 
thrown  some  doubt  upon  the  proposition,  the  insertion  of  this 
power  in  the  certificate  of  incorporation  can  do  no  harm, 
and  would  probably  make  valid,  at  least  as  among  the  members 
of  the  corporation  themselves,  any  act  otherwise  lawful  which 
might  be  sanctioned  by  the  board  of  directors  through  a  reso- 
lution passed  outside  of  the  state. 

§  73.     Action  of  Directors  Not  Assembled  in  Meeting. 

The  corporation  law  of  West  Virginia,  as  well  as  that  of 
Nevada,  prescribes  that  the  action  of  a  majority  of  the  board 
of  directors,  although  not  at  a  regularly  called  meeting,  if  as- 
sented to  in  writing  by  all  of  the  other  members  of  the  board, 
shall  always  be  as  valid  and  effective  in  all  respects  as  if 

so  Handley  v.  Stutz,  139  U.  S.  417,  11  Sup.  Ct.  530,  35  L.  Ed.  227; 
Galveston,  H.  &  H.  R.  Co.  v.  Cowdrey,  11  Wall.  (U.  S.)  459,  20  L.  Ed. 
199 ;  Aspinwall  v.  Railroad  Co.,  20  Ind.  492,  83  Am.  Dec.  329 ;  Reich- 
wald  v.  Hotel  Co.,  106  111.  439 ;  3  Clark  &  M.  Corp.  §  679b. 

si  McCall  v.  Manufacturing  Co.,  6  Conn.  428. 

32  Arms  v.  Conant,  36  Vt.  744. 

sa  3  Clark  &  M.  Corp.  §  679b. 
(58) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  74 

passed  by  the  board  in  regular  meeting  assembled.34  This 
gives  legislative  sanction  to  a  practice  sometimes  indulged  in, 
but  which,  without  some  specific  authority  for  it,  is  illegal.35 
The  reason  why  the  directors  are  required  to  meet  and  confer 
is  that  they  are  acting  as  trustees  for  the  interests  of  the  stock- 
holding body  at  large.  They  are  constituted  a  board  in  order 
that  they  may  deliberate,  and  each  director  have  the  benefit 
of  the  views  pro  and  con  of  every  other  director.  When  acting 
outside  of  a  meeting  this  interchange  of  views  cannot  usually 
be  had,  and  the  interests  of  the  stockholders  are  to  that  extent 
prejudiced.  Nevertheless  it  has  been  found  very  desirable  in 
many  cases  where  a  quorum  of  the  board  cannot  be  obtained 
because  of  absence  of  certain  members,  or  for  other  causes, 
and  where  the  matter  to  be  authorized  is  one  so  clearly,  ex- 
pedient as  to  leave  little  doubt  of  its  wisdom,  to  have  the 
power  to  take  the  action  of  the  board  by  obtaining  the  indi- 
vidual assent  of  the  various  members  in  writing.  Should 
such  a  provision  be  inserted  in  the  charter  of  a  corporation, 
it  is  not  conceived  that  any  one  could  take  exception  to  this 
method  of  procedure.  Certainly  no  stockholder  who  pur- 
chased stock  with  the  full  knowledge  that  the  practice  had 
been  sanctioned  could  be  heard  to  complain,  and  no  one  else 
would  be  in  a  position  to  criticise  this  mode  of  action.36  In 
many  recent  charters,  therefore,  such  a  clause  has  been  in- 
serted. 

§  74.     Power  to  Regulate  Inspection  of  Records. 

At  common  law  the  stockholders  of  a  corporation  had  a 
right  to  examine  at  reasonable  times  the  books  and  records 
of  the  company.37  This  right  has  often  been  availed  of  by 

s*W.  Va.  Code,  c.  53.  §  51,  amended  by  Acts  1901,  c.  35;  Gen. 
Corp.  Law  Nev.  1903,  §§  23,  111. 

36  Kansas  City  Hay  Press  Co.  v.  Devol  (C.  C.)  72  Fed.  717;   3  Clark 
&  M.  Corp.  §  677 ;   10  Cyc.  774,  775. 

se  Supra,  §  60,  n.  7 ;   3  Clark  &  M.  Corp.  §  677. 

37  Ranger  v.  Cotton  Press  Co.  (C.  C.)  51  Fed.  61 ;    2  Clark  &  M. 
Corp.  §§  530,  531 ;    2  Cook,  Corp.  §  511 ;   10  Cyc.  954. 

(59) 


§  75  BUSINESS   CORPORATIONS.  (Ch.  3 

persons  interested  in  a  rival  business,  who,  merely  for  the 
purpose  of  ascertaining  the  trade  secrets  of  a  competitor,  have 
purchased  a  few  shares  of  stock  in  such  competing  company.38 
To  remedy  this  mischief,  charters  are  frequently  drawn  with 
a  clause  empowering  the  directors  to  determine  from  time  to 
time  the  conditions  under  which  such  inspection  will  be  per- 
mitted, and  forbidding  the  examination  of  the  books  by  any 
stockholder  except  in  compliance  with  these  rules.38 

§  75.     Directors  Making  and  Amending  By-Laws. 

By-laws  are  usually  adopted  and  amended  by  the  stockhold- 
ers in  meeting  assembled.  They  are  enacted  to  define  and 
limit  the  powers  of  directors  and  officers.  It  is  contrary  to 
the  general  practice  to  confer  the  right  to  make  and  amend 
by-laws  upon  the  directors.40  There  is  no  reason,  however, 
why  this  may  not  be  done,  if  the  incorporators  or  stockholders 
see  fit  to  do  so.41  In  fact,  the  statutes  in  some  jurisdictions 
confer  this  power  upon  the  directors  alone,  as  in  the  District 
of  Columbia;  42  and  in  other  jurisdictions,  as  in  New  Jersey,43 
Delaware,44  and  Porto  Rico,45  the  directors  may  be  given  this 
power  if  so  specified  in  the  charter.  In  states  where  it  is  not 
contrary  to  the  policy  of  the  law  to  vest  a  right  of  this  mag- 
nitude in  the  directors,  it  may  be  thought  desirable  to  insert 
such  provisions  in  the  certificate  of  incorporation.  It  is  a 
power  which  is  apt  to  be  dangerous  to  the  rights  of  the  minor- 
ity stockholders. 

8«  Heminway  v.  Heroinway,  58  Conn.  443,  19  Atl.  766;    State  ex 
rel.  O'Hara  v.  Biscuit  Co.,  69  N.  J.  Law,  198,  54  Atl.  241. 
8»  See  Dill,  N.  J.  Corp.,  page  facing  page  64. 
403  Clark  &  M.  Corp.  §  641 ;  10  Cyc.  353 ;   1  Cook,  Corp.  §  4a. 

41  Id. ;  10  Cyc.  354. 

42  D.  C.  Code,  §  612. 

43  G.  C.  L.  N.  J.  §  11. 

44  Gen.  Corp.  Law  Del.  §  12. 

45  Civ.  Code  Porto  Rico,  tit.  2,  c.  1,  §  39. 
(GO) 


Ch.  3)  CERTIFICATE   OF   INCORPORATION.  §  78 

§  76.     Executive  Committee. 

In  large  corporations,  having  a  great  number  of  directors, 
it  has  been  found  convenient  to  delegate  all  the  powers  of  the 
board  to  an  executive  committee,  which  shall,  between  the 
meetings  of  the  board,  exercise  all  the  powers  of  the  latter. 
This  device  is  of  frequent  occurrence  when  it  is  sought  to 
place  the  control  of  large  corporate  interests  in  the  hands  of 
a  small  coterie  of  interested  persons.  In  the  absence  of  a 
statute,  charter  provisions,  or  general  governing  custom  au- 
thorizing it,  it  has  been  held  that  there  is  no  warrant  for 
the  delegation  by  the  directors  of  any  of  their  ^discretionary 
powers  to  an  executive  committee.46  Merely  ministerial 
powers  can  be  so  delegated.47  If,  however,  the  certificate  of 
incorporation  contains  a  clause  authorizing  an  executive  com- 
mittee and  defining  its  powers,  it  appears  to  be  legal,  even 
to  the  extent  of  discretionary  acts.48 

§  77.  Some  of  the  features  to  which  attention  has  been 
called  above  may  be  contained  either  in  the  by-laws  or  in  the 
charter.  Great  differences  in  practical  result  may  depend  upon 
whether  these  matters  are  inserted  in  the  charter  or  the  by- 
laws. It  is  usually  much  more  difficult  to  amend  a  charter 
than  to  change  a  by-law.  A  charter  provision  inserted  for 
the  benefit  of  minority  stockholders  affords  much  more  ade- 
quate protection  to  them,  therefore,  than  the  self-same  provi- 
sion appearing  in  the  by-laws  merely.49 

CAPITAL  STOCK. 

§  78.  The  capital  stock  must,  of  course,  be  limited  to  such 
an  amount  as  is  warranted  by  law.  The  charter  should  show 
the  amount,  the  number  of  shares  into  which  it  is  to  be  divided, 

46  See  on  this  subject,  2  Cook,  Corp.  §  715;   10  Cyc.  772. 

47  Id. ;    see  Metropolitan  Telephone  &  Telegraph  Co.  v.  Telegraph 
&  Telephone  Co.,  44  N.  J.  Eq.  568,  14  Atl.  907. 

48  Id. 

49  Loewenthal  v.  Reclaiming  Co.,  52  N.  J.  Eq.  440,  28  Atl.  454. 

(61) 


§  78a  BUSINESS  CORPORATIONS.  (Ch.  3 

and  the  par  value  of  each  share,  although  in  certain  portions 
of  the  United  States  the  exact  amount  of  capital  stock  need 
not  be  specified  in  the  charter.50 

§  78a.  In  fixing  upon  the  amount  of  capital  stock,  several 
points  should  be  taken  into  consideration.  Inasmuch  as  the 
capital  of  a  given  corporation  may  be  fixed  at  a  large  amount, 
and  the  company  start  in  business  with  but  a  small  portion 
of  it  actually  paid  in,  the  temptation  is  great  with  many  pro- 
moters to  inflate  the  importance  and  solidity  of  the  corporation 
in  the  eyes  of  the  public  by  establishing  the  capital  at  a  high 
figure.  This  is  sometimes  done  not  merely  for  this  reason, 
but  to  permit  the  issuing  of  such  increased  amounts  of  stock 
from  time  to  time  as  the  needs  of  the  business  may  seem  to 
demand,  without  the  necessity  for  resorting  to  an  amendment 
of  the  charter.  But  the  effect  of  the  tax  laws  must  be  given 
due  attention  in  this  respect.  In  some  states  the  initial  and 
annual  taxation  is  based  upon  the  amount  of  stock,  not  actually 
issued  and  outstanding,  but  authorized,61  in  which  event  it 
would  be  worse  than  foolish  to  fix  the  authorized  capital  at 
an  amount  largely  in  excess  of  that  which  will  be  required 
for  the  needs  of  the  present,  and  the  immediate  future.  Not 
only  must  the  laws  of  the  parent  state  be  examined  and  consid- 
ered, but  also  the  laws  of  every  other  state  or  jurisdiction 
where  the  corporation  proposes  to  do  business.  A  tax  may 
be  imposed  as  a  condition  of  admitting  the  corporation  to  do 
business  in  another  state,  based  upon  the  authorised  capital, 
although  in  the  parent  state  the  basis  is  the  capital  issued  and 
outstanding. 

§  78b.  The  different  classes  of  stock  which  are  to  be  is- 
sued, and  the  amounts  of  each  class,  respectively,  should  be 
stated  in  the  certificate  of  incorporation.  There  is  no  neces- 
sity for  a  special  statute  conferring  the  right,  upon  the  incor- 
poration of  a  company,  to  create  preferred  stock.82  Where 

6«  1  Cook,  Corp.  §  isi'. 

si  W.  Va.  Code,  c.  32,  §  87,  as  amended  by  Acts  1903,  c.  3, 

52  i  Cook,  Corp.  §  268. 

(62) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  80 

such  stock  is  authorized,  the  preferences  should  plainly  appear 
upon  the  face  of  the  charter ;  the  character  of  the  preferences, 
both  as  to  dividends  and  on  the  dissolution  of  the  company, 
being  explicitly  stated.  The  nature  of  preferences,  and  man- 
ner of  stating  them,  will  be  treated  in  a  subsequent  chapter 
of  this  work.53  Where  the  dividends  on  preferred  stock  are 
limited  by  statute  to  a  certain  amount,  this  amount  should,  of 
course,  not  be  exceeded. 


NAMES  AND  RESIDENCES  OF  INCORPORATORS. 

§  79.  There  is  a  distinction  between  statutes  which  require 
the  names  and  residences  of  incorporators  to  be  stated  in  the 
certificate  of  incorporation,  and  those  which  require  merely 
the  names  and  post-office  addresses  of  the  incorporators  to  be 
so  set  forth.  Where  the  latter  only  are  required,  the  post- 
office  address  may  be  given  in  the  care  of  any  person  far  re- 
moved from  the  domicile,  and  there  need  be  nothing  to  advise 
the  tax  authorities  of  the  actual  place  of  residence  of  any  inter- 
est the  various  incorporators  may  have  in  the  company.54 

NUMBER  OF  SHARES  SUBSCRIBED. 

§  80.  In  certain  states  where  the  liability  of  stockholders 
is  limited  to  the  amount  unpaid  on  the  original  subscription, 
and  no  particular  amount  of  stock  is  required  to  be  subscribed 
as  a  condition  precedent  to  obtaining  the  charter  or  to  enga- 
ging in  business,  it  is  customary  to  have  each  incorporator  sub- 
scribe for  one  share  only.  He  can  afterwards  purchase  as 
much  more  stock  as  he  pleases,  but  there  will  be  no  liability 
beyond  the  amount  unpaid  on  the  one  share  for  which  sub- 
scription was  originally  made. 

53  Infra.  §§  172-176. 

64  Dill,  N.  J.  Corp.  p.  23. 

(63) 


§  81  BUSINESS  CORPORATIONS.  (Ch.  3 

EXISTENCE  OF  CORPORATION-. 

§  81.  Where  a  corporation  can  be  made  of  unlimited  dura- 
tion, it  is  generally  better  to  state  its  corporate  life  as  perpetual. 
This  will  avoid  the  necessity  of  renewing  the  charter  at  the 
expiration  of  the  time  which  would  be  otherwise  limited  in 
the  certificate. 

SIGNATURES. 

§  82.  After  the  certificate  of  incorporation  has  been  prop- 
erly drawn,  it  must,  of  course,  be  signed  by  the  statutory 
number  of  persons.  Where  the  law  requires  all  directors  to 
be  stockholders,  and  that  the  directors  for  the  first  year  shall 
be  named  in  the  certificate,  and  does  not  require  any  reference 
to  the  amount  subscribed  by  each  incorporator,  it  is  safer  to 
have  each  director  sign  as  an  incorporator,  although  the  num- 
ber of  signers  may  be  more  than  the  minimum  number  of  incor- 
porators  specified  in  the  statute.  The  reason  for  this  is  that 
the  certificate  then  shows  on  its  face,  prima  facie,  that  the 
directors  named  are  interested  financially  in  the  company.  A 
better  way  still,  however,  is  to  have  the  amount  subscribed 
by  each  incorporator  inserted  in  the  certificate,  although  not 
required  by  statute.  Sometimes,  though,  practical  objections 
to  doing  this  may  exist. 

ACKNOWLEDGMENT. 

§  83.  The  acknowledgments  of  the  incorporators  should 
be  taken  before  an  officer  authorized  by  the  law  of  the  parent 
state  to  take  such  acknowledgments,  and  should  be  in  the 
form  required  by  the  laws  of  that  state.  It  is  generally  re- 
quired, where  the  acknowledgment  is  taken  outside  the  limits 
of  that  state,  that  the  notary's  official  signature  and  seal  should 
be  authenticated  by  the  clerk  of  the  court  of  the  county  where 
the  acknowledgment  is  taken,  but  this  is  not  universal. 
(64) 


Ch.  3)  CERTIFICATE  OF  INCORPORATION.  §  84:1) 

FORMS  OF  CHARTER,  OBJECT  CLAUSES,  CLAUSES  REGULATING 
BUSINESS,  ETC. 

§  84.  Rather  than  attempt  to  submit  to  the  reader  a  form 
of  charter,  which,  by  filling  in  certain  blanks,  he  may  adapt 
to  his  own  purposes,  it  has  seemed  to  the  author  better  to  in- 
sert a  certificate  of  incorporation  prepared  by  most  eminent 
counsel  for  one  of  the  largest  corporations  ever  organized 
under  the  laws  of  the  state  of  New  Jersey.  This  can  easily 
be  modified  to  meet  the  needs  of  any  corporation.  In  order, 
however,  that  there  may  be  some  guide  to  those  who  desire 
to  organize  a  corporation  having  different  objects  in  view, 
and  who  wish  to  confer  other  powers  than  those  permitted 
by  the  charter  referred  to,  additional  object  clauses  are  ap- 
pended to  this  chapter,  as  well  as  certain  clauses  regulating 
the  methods  of  doing  business  somewhat  differently  than  are 
found  in  the  model  given. 

§  84a.  The  following  cases  contain  instructive  comments 
as  to  the  advantages  of  inserting  such  clauses :  Peruvian 
Railways  Co.  v.  Thames  &  Mersey  M.  I.  Co.,  2  Ch.  Div.  617 ; 
Ernest  v.  Nicholls,  6  H.  L.  Cas.  401 ;  Overend,  Gurney  &  Co. 
v.  Gibbs,  L.  R.  5  Eng.  &  Irish  App.  480.  Many  other  simi- 
lar clauses  will  be  found  in  the  very  complete  work  edited  by 
James  B.  Dill,  Esq.,  on  New  Jersey  Corporations. 

§  84b.     Amended   Certificate   of   Incorporation   of   United 
States  Steel  Corporation. 

We,  the  undersigned,  in  order  to  form  a  corporation  for  the  pur- 
poses hereinafter  stated,  under  and  pursuant  to  the  provisions  of  the 
act  of  the  Legislature  of  the  state  of  New  Jersey,  entitled  "An  act 
concerning  corporations  (Revision  of  1896),"  and  the  acts  amendatory 
thereof  and  supplemental  thereto,  do  hereby  certify  as  follows: 

I.  The  name  of  the  corporation  is  "United  States  Steel  Corpora- 
tion." 

II.  The  location  of  its  principal  office  in  the  state  of  New  Jersey  is 
at  No.  51  Newark  street,  in  the  city  of  Hoboken,  county  of  Hudson. 
The  name  of  the  agent  therein  and  in  charge  thereof,  upon  whom 
process  against  the  corporation  may  be  served,  is  Hudson  Trust  Com- 
pany.   Said  office  is  to  be  the  registered  office  of  said  corporation. 

CLEPH. Bus. CORP. — 5 


&tb  BUSINESS    CORPORATIONS.  (Cll.  3 

III.  The  objects  for  which  the  corporation  is  formed  are: 

To  manufacture  iron,  steel,  manganese,  coke,  copper,  lumber  and 
other  materials,  and  all  or  any  articles  consisting,  or  partly  consist- 
ing, of  iron,  steel,  copper,  wood  or  other  materials,  and  all  or  any 
products  thereof. 

To  acquire,  own,  lease,  occupy,  use  or  develop  any  lands  containing 
ooal  or  iron,  manganese,  stone  or  other  ores,  or  oil,  and  any  wood 
lands,  or  other  lands  for  any  purpose  of  the  company. 

To  mine,  or  otherwise  to  extract  or  remove  coal,  ores,  stone  and 
other  minerals  and  timber  from  any  lands  owned,  acquired,  leased  or 
occupied  by  the  company,  or  from  any  other  lands. 

To  buy  and  sell,  or  otherwise  to  deal  or  to  traffic  in,  iron,  steel, 
manganese,  copper,  stone,  ores,  coal,  coke,  wood,  lumber  and  other 
materials,  and  any  of  the  products  thereof,  and  any  articles  consist- 
ing, or  partly  consisting  thereof. 

To  construct  bridges,  buildings,  machinery,  ships,  boats,  engines, 
ears  and  other  equipment,  railroads,  docks,  slips,  elevators,  water 
\vorks,  gas  works  and  electric  works,  viaducts,  aqueducts,  canals  and 
other  waterways,  and  any  other  means  of  transportation,  and  to  sell 
the  same,  or  otherwise  to  dispose  thereof,  or  to  maintain  and  operate 
the  same,  except  that  the  company  shall  not  maintain  or  operate  any 
railroad  or  canal  in  the  state  of  New  Jersey. 

To  apply  for,  obtain,  register,  purchase,  lease,  or  otherwise  to  ac- 
quire, and  to  hold,  use,  own,  operate  and  introduce,  and  to  sell,  as- 
sign, or  otherwise  to  dispose  of,  any  trade  marks,  trade  names,  pat- 
ents, inventions,  improvements  and  processes  used  in  connection  with, 
or  secured  under  letters  patent  of  the  United  States,  or  elsewhere,  or 
otherwise ;  and  to  use,  exercise,  develop,  grant  licenses  in  respect  of, 
or  otherwise  to  turn  to  account  any  such  trade-marks,  patents,  li- 
censes, processes,  and  the  like,  or  any  such  property  or  rights. 

To  engage  in  any  other  manufacturing,  mining,  construction  or 
transportation  business  of  any  kind  or  character  whatsoever,  and  to 
that  end  to  acquire,  hold,  own  and  dispose  of  any  and  all  property, 
assets,  stocks,  bonds  and  rights  of  any  and  every  kind ;  but  not  to 
engage  in  any  business  hereunder  which  shall  require  the  exercise  of 
the  right  of  eminent  domain  within  the  state  of  New  Jersey. 

To  acquire  by  purchase,  subscription  or  otherwise,  and  to  hold  or 
to  dispose  of,  stocks,  bonds  or  any  other  obligations  of  any  corpora- 
tion formed  for  or  then  or  theretofore  engaged  in  or  pursuing,  any 
one  or  more  of  the  kinds  of  business,  purposes,  objects  or  operations 
above  indicated,  or  owning  or  holding  any  property  of  any  kind  here- 
in mentioned ;  or  of  any  corporation  owning  or  holding  the  stocks 
or  the  obligations  of  any  such  corporation. 

To  hold  for  investment,  or  otherwise  to  use,  sell  or  dispose  of,  any 
(66) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  84  & 

stock,  bonds  or  other  obligations  of  any  such  other  corporation;  to 
aid  in  any  manner  any  corporation  whose  stock,  bonds  or  other  obli- 
gations are  held  or  are  in  any  manner  guaranteed  by  the  company, 
and  to  do  any  other  acts  or  things  for  the  preservation,  protection, 
improvement  or  enhancement  of  the  value  of  any  such  stock,  bonds 
or  other  obligations,  or  to  do  any  acts  or  things  designed  for  any  such 
purpose ;  and,  while  owner  of  any  such  stock,  bonds  or  other  obliga- 
tions, to  exercise  all  the  rights,  powers  and  privileges  of  ownership 
thereof,  and  to  exercise  any  and  all  voting  power  thereon. 

The  business  or  purpose  of  the  company  is  from  time  to  time  to  do 
any  one  or  more  of  the  acts  and  things  hei-ein  set  forth ;  and  it  may 
conduct  its  business  in  other  states  and  in  the  territories  and  foreign 
countries,  and  may  have  one  office  or  more  than  one  office,  and  keep 
the  books  of  the  company  outside  of  the  state  of  New  Jersey,  except 
as  otherwise  may  be  provided  by  law ;  and  may  hold,  purchase,  mort- 
gage and  convey  real  and  personal  property  either  in  or  out  of  the 
state  of  New  Jersey. 

Without  in  any  particular  limiting  any  of  the  objects  and  powers 
of  the  corporation,  it  is  hereby  expressly  declared  and  provided  that 
the  corporations  shall  have  power  to  issue  bonds  and  other  obliga- 
tions, in  payment  for  property  purchased  or  acquired  by  it,  or  for 
any  other  object  in  or  about  its  business :  to  mortgage  or  pledge  any 
.stocks,  bonds  or  other  obligations,  or  any  property  which  may  be  ac- 
quired by  it,  to  secure  any  bonds  or  other  obligations  by  it  issued  or 
incurred :  to  guarantee  any  dividends  or  bonds  or  contracts  or  other 
obligations ;  to  make  and  perform  contracts  of  any  kind  and  descrip- 
tion ;  and  in  carrying  on  its  business,  or  for  the  purpose  of  attaining 
or  furthering  any  of  its  objects,  to  do  any  and  all  other  acts  and, 
things,  and  to  exercise  any  and  all  other  powers  which  a  copartner- 
ship or  natural  person  could  do  and  exercise,  and  which  now  or  here- 
after may  be  authorized  by  law. 

IV.  The  total  authorized  capital  stock  of  the  corporation  is  eleven 
hundred  million  dollars  ($1,100,000,000).  divided  into  eleven  million 
shares  of  the  par  value  of  one  hundred  dollars  each.  Of  such  total 
authorized  capital  stock,  five  million  five  hundred  thousand  shares, 
amounting  to  five  hundred  and  fifty  million  dollars,  shall  be  preferred 
stock,  and  five  million  five  hundred  thousand  shares,  amounting  to 
five  hundred  and  fifty  million  dollars,  shall  be  common  stock. 

From  time  to  time,  the  preferred  stock  and  the  common  stock  may 
be  increased  according  to  law.  and  may  be  issued  in  such  amounts 
and  proportions  as  shall  be  determined  by  the  board  of  directors,  and 
ns  may  be  permitted  by  law. 

The  holders  of  the  preferred  stock  shall  be  entitled  to  receive  when 
and  as  declared,  from  the  surplus  or  net  profits  of  the  corporation, 

(G7) 


§84b 


BUSINESS   CORPORATIONS. 


(Ch.3 


yearly  dividends  at  U.e  rate  of  seven  per  centum  per  annum,  and  no 
more,  payable  quarterly  on  dates  to  be  fixed  by  the  by-laws.  The 
dividends  on  the  preferred  stock  shall  be  cumulative,  and  shall  be 
payable  before  any  dividend  on  the  common  stock  shall  be  paid  or 
set  apart:  so  that,  if  any  year  dividends  amounting  to  seven  per  cent, 
shall  not  have  been  paid  thereon,  the  deficiency  shall  be  payable  be- 
fore any  dividends  shall  be  paid  upon  or  set  apart  for  the  common 
stock. 

Whenever  all  cumulative  dividends  on  the  preferred  stock  for  all 
previous  years  shall  have  been  declared  and  shall  have  become  pay- 
able, and  the  accrued  quarterly  installments  for  the  current  year 
shall  have  been  declared,  and  the  company  shall  have  paid  such  cumu- 
lative dividends  for  previous  years  and  such  accrued  quarterly  in- 
stallments, or  shall  have  .set  aside  from  its  surplus  or  net  profits  a 
sum  sufficient  for  the  payment  thereof,  the  board  of  directors  may 
declare  dividends  on  the  common  stock,  payable  then  or  thereafter, 
out  of  any  remaining  surplus  or  net  profits. 

In  the  event  of  any  liquidation  or  dissolution  or  winding  up  (wheth- 
er voluntary  or  involuntary)  of  the  corporation,  the  holders  of  the 
preferred  stock  shall  be  entitled  to  be  paid  in  full  both  the  par 
amount  of  their  shares,  and  the  unpaid  dividends  accrued  thereon 
before  any  amount  shall  be  paid  to  the  holders  of  the  common  stock ; 
and  after  the  payment  to  the  holders  of  the  preferred  stock  of  its 
par  value,  and  the  unpaid  accrued  dividends  thereon,  the  remaining 
assets  and  funds  shall  be  divided  and  paid  to  the  holders  of  the 
common  stock  according  to  their  respective  shares. 

V.  The  names  and  post-office  addresses  of  the  incorporators,  and 
the  number  of  shares  of  stock  for  which  severally  and  respectively 
we  do  hereby  subscribe  (the  aggregate  of  our  said  subscriptions,  be- 
ing three  thousand  dollars,  is  the  amount  of  capital  stock  with  which 
the  corporation  will  commence  business),  are  as  follows: 


• 

Number  of 
Shares. 

Name. 

Post  Office  Address. 

Pre-     Com- 
ferred    mon 
Stock.  Stock. 

Charles 

C.  Cluff  

51  Newark  Street,  Hobo- 

ken,  New  Jersey  

5            5 

William 

Ditto.            

5            5 

Charles 

MacVeagb.  

Ditto.            

5            5 

(68) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  84b 

VI.  The  duration  of  the  corporation  shall  be  perpetual. 

VII.  The  number  of  directors  of  the  company  shall  be  fixed  from 
time  to  time  by  the  by-laws ;    but  the  number  if  fixed  at  more  than 
three,  shall  be  some  multiple  of  three.    The  directors  shall  be  classi- 
fied with  respect  to  the  time  for  which  they  shall  severally  hold 
office  by  dividing  them  into  three  classes,  each  consisting  of  one-third 
of  the  whole  number  of  the  board  of  directors.    The  directors  of  the 
first  class  shall  be  elected  for  a  term  of  one  year;    the  directors  of 
the  second  class  for  a  term  of  two  years ;    and  the  directors  of  the 
third  class  for  a  term  of  three  years ;   and  at  each  annual  election  the 
successors  to  the  class  of  directors  whose  terms  shall  expire  in  that 
year  shall  be  elected  to  hold  office  for  the  term  of  three  years,  so  that 
the  term  of  office  of  one  class  of  directors  shall  expire  in  each  year. 

The  number  of  the  directors  may  be  increased  as  may  be  provided 
in  the  by-laws.  In  case  of  any  increase  of  the  number  of  the  direct- 
ors the  additional  directors  shall  be  elected  as  may  be  provided  in 
the  by-laws,  by  the  directors  or  by  the  stockholders  at  an  annual  or 
special  meeting,  and  one-third  of  their  number  shall  be  elected  for 
the  then  unexpired  portion  of  the  term  of  the  directors  of  the  first 
class,  one-third  of  their  number  for  the  unexpired  portion  of  the 
term  of  the  directors  of  the  second  class,  and  one-third  of  their  num- 
ber for  the  unexpired  portion  of  the  term  of  the  directors  of  the  third 
class,  so  that  each  class  of  directors  shall  be  increased  equally. 

In  case  of  any  vacancy  in  any  class  of  directors  through  death, 
resignation,  disqualification  or  other  cause,  the  remaining  directors, 
by  affirmative  vote  of  a  majority  of  the  board  of  directors,  may  elect 
a  successor  to  hold  office  for  the  unexpired  portion  of  the  term  of  the 
director  whose  place  shall  be  vacant,  and  until  the  election  of  a  suc- 
cessor. 

The  board  of  directors  shall  have  power  to  hold  their  meetings 
outside  of  the  state  of  New  Jersey  at  such  places  as  from  time  to 
time  may  be  designated  by  the  by-laws  or  by  resolution  of  the  board. 
The  by-laws  may  prescribe  the  number  of  directors  necessary  to  con- 
stitute a  quorum  of  the  board  of  directors,  which  number  may  be  less 
than  a  majority  of  the  whole  number  of  the  directors. 

Unless  authorized  by  votes  given  in  person  or  by  proxy  by  stock- 
holders holding  at  least  two-thirds  of  the  capital  stock  of  the  corpo- 
ration, which  is  represented  and  voted  upon  in  person  or  by  proxy 
at  a  meeting  specially  called  for  that  purpose  or  at  an  annual  meet- 
ing, the  board  of  directors  shall  not  mortgage  pr  pledge  any  of  its 
real  property,  or  any  shares  of  the  capital  stock  of  any  other  cor- 
poration ;  but  this  prohibition  shall  not  be  construed  to  apply  to  the 
execution  of  any  purchase-money  mortgage  or  any  other  purchase- 
inont-y  lien.  As  authorized  by  the  act  of  the  Legislature  of  the  state 

(60) 


§  84b  BUSINESS  CORPORATIONS.  (Ch.  3 

of  New  Jersey  passed  March  22,  1901,  amending  the  17th  section  of 
the  act  concerning  corporations  (Revision  of  1896),  any  action  which 
theretofore  required  the  consent  of  the  holders  of  two-thirds  of  the 
stock  at  any  meeting  after  notice  to  them  given,  or  required  their 
consent  in  writing  to  be  filed,  may  be  taken  upon  the  consent  of,  and 
the  consent  given  and  filed  by  the  holders  of  two-thirds  of  the  stock 
of  each  class  represented  at  such  meeting  in  person  or  by  proxy. 

Any  officer  elected  or  appointed  by  the  board  of  directors  may  be 
removed  at  any  time  by  the  affirmative  vote  of  a  majority  of  the 
whole  board  of  directors.  Any  other  officer  or  employe  of  the  Com- 
pany may  be  removed  at  any  time  by  vote  of  the  board  of  directors, 
or  by  any  committee  or  superior  officer  upon  whom  such  power  of 
removal  may  be  conferred  by  the  by-laws  or  by  vote  of  the  board  of 
directors. 

The  board  of  directors,  by  the  affirmative  vote  of  a  majority  of  the 
whole  board,  may  appoint  from  the  directors  an  executive  committee, 
of  which  a  majority  shall  constitute  a  quorum ;  and  to  such  extent 
as  shall  be  provided  in  the  by-laws,  such  committee  shall  have  and 
may  exercise  all  or  any  of  the  powers  of  the  board  of  directors, 
including  power  to  cause  the  seal  of  the  corporation  to  be  affixed  to 
all  papers  that  may  require  it. 

The  board  of  directors,  by  the  affirmative  vote  of  a  majority  of  the 
whole  board,  may  appoint  any  other  standing  committees,  and  such 
standing  committees  shall  have  and  may  exercise  such  powers  as 
shall  be  conferred  or  authorized  by  the  by-laws. 

The  board  of  directors  may  appoint  not  only  other  officers  of  the 
company,  but  also  one  or  more  vice-presidents,  one  or  more  assistant 
treasurers  and  one  or  more  assistant  secretaries ;  and,  to  the  extent 
provided  in  the  by-laws,  the  persons  so  appointed  respectively  shall 
have  and  may  exercise  all  the  powers  of  the  president,  of  the  treas- 
urer and  of  the  secretary,  respectively. 

The  board  of  directors  shall  have  power  from  time  to  time  to  fix 
and  to  determine  and  to  vary  the  amount  of  the  working  capital  of 
the  company ;  and  to  direct  and  determine  the  use  and  disposition 
of  any  surplus  or  net  profits  over  and  above  the  capital  stock  paid  in ; 
and  in  its  discretion  the  board  of  directors  may  use  and  apply  any 
such  surplus  or  accumulated  profits  in  purchasing  or  acquiring  its 
bonds  or  other  obligations,  or  shares  of  its  own  capital  stock,  to  such 
extent  and  in  such  manner  and  upon  such  terms  as  the  board  of 
directors  shall  deem  expedient ;  but  shares  of  such  capital  stock  so 
purchased  or  acquired  may  be  resold,  unless  such  shares  shall  have 
been  retired  for  the  purpose  of  decreasing  the  company's  capital 
stock  as  provided  by  law. 
(70) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  84c 

The  board  of  directors  from  time  to  time  shall  determine  whether 
and  to  what  extent,  and  at  what  times  and  places,  and  under  what 
conditions  and  regulations,  the  accounts  and  books  of  the  corporation, 
or  any  of  them,  shall  be  open  to  the  inspection  of  the  stockholders, 
and  no  stockholder  shall  have  any  right  to  inspect  any  account  or 
book  or  document  of  the  corporation,  except  as  conferred  by  statute 
or  authorized  by  the  board  of  directors,  or  by  a  resolution  of  the 
stockholders. 

Subject  always  to  by-laws  made  by  the  stockholders,  the  board  of 
directors  may  make  by-laws,  and,  from  time  to  time,  may  alter, 
amend  or  repeal  any  by-laws ;  but  any  by-laws  made  by  the  board  of 
directors  may  be  altered  or  repealed  by  the  stockholders  at  any  an- 
nual meeting,  or  at  any  special  meeting,  provided  notice  of  such  pro- 
posed alteration  or  repeal  be  included  in  the  notice  of  the  meeting. 

In  witness  whereof,  we  have  hereunto  set  our  hands  and  seals  the 
23rd  day  of  February,  1901.  Charles  C.  Cluff.  [L.  S.] 

William  J.  Curtis.        [L.  S.] 
Charles  MacVeagh.      [L.  S.] 

Signed,  sealed  and  delivered  in  the  presence  of 
Francis  Lynde  Stetson. 
Victor  Morawetz. 

State  of  New  Jersey,  i 

^s  * 
County  of  Hudson,    j 

Be  it  remembered  that  on  this  23rd  day  of  February,  1901.  before 
the  undersigned,  personally  appeared  Charles  C.  Cluff,  William  J. 
Curtis  and  Charles  MacVeagh,  who,  I  am  satisfied,  are  the  persons 
named  in  and  who  executed  the  foregoing  certificate;  and  I  having 
first  made  known  to  them  and  to  each  of  them,  the  contents  thereof, 
they  did  each  acknowledge  that  they  signed,  sealed  and  delivered  the 
same  as  their  voluntary  act  and  deed.  Geo.  Holmes. 

Master  in  Chancery  of  New  Jersey. 

[lOct.  Internal  Revenue  Stamp  Cancelled.] 

Indorsed:    "Received  in  the  Hudson  Co.  N.  J.  Clerk's  Office  Feb'y 

25th  A.  D.  1901  and  Recorded  in  Clerk's  Record  No. on  Page . 

Maurice  J.  Stack,  Clerk." 

Indorsed:   "Filed  Feb.  25,  1901.    George  WTurts,  Secretary  of  State." 

Indorsed:  "Filed  April  1,  1901.    George  Wurts,  Secretary  of  State." 

OBJECT  CLAUSES. 
§  84c.     Mercantile  Business   (Dry   Goods,  Notions,  Etc.). 

To  establish  and  carry  on  all  or  any  part  of  the  business  of  manu- 
facturing, importing,  exporting,  buying  and  selling,  either  as  whole- 

(71) 


§  8±d  BUSINESS   CORPORATIONS.  (Ch.  3 

sale  or  retail  merchants  or  both,  any  or  all  of  the  following  classes 
of  merchandise,  to  wit :  Dry  goods,  notions,  boots  and  shoes,  hats, 
and  wearing  apparel  generally,  linen  and  cotton  goods,  silks,  furs, 
laces,  and  generally  and  without  limitation  all  articles  of  merchan- 
dise usually  sold  or  which  may  conveniently  be  sold  in  connection 
with  any  of  the  merchandise  hereinabove  referred  to. 


§  84d.     Department  Store. 

To  establish  and  conduct  a  department  store,  with  any  and  all 
branches  usually  incident  thereto,  and  to  this  end: 

(1)  To  carry  on,  both  wholesale  and  retail,  the  whole  or  any  por- 
tion of  the  businesses  of  manufacturing,  importing,  exporting,  and 
buying  and  selling  generally,  dry  goods,  furs,  haberdasherie,  hosiery 
and  textile  fabrics  of  all  kinds;    millinery,  garments,  and  wearing 
apparel  generally;    linens,  laces,  feathers,  leather  goods,  furniture, 
iron  ware,  china  and  glass  ware,  crockery,  and  other  household  fit- 
tings and  utensils,  bric-a-brac  and  ornaments  generally;    stationery, 
notions,  and  fancy  goods;    hardware,  jewelry,  gold  and  silver  and 
plated  ware,  watches,  and  precious  stones ;    meats  and  provisions 
generally ;    drugs,  chemicals,  perfumery,  soap,  and  toilet  articles  gen- 
erally ;    books,  papers,  magazines,  musical  instruments,  bicycles,  and 
tricycles,  boats,  motor  vehicles  of  all  kinds,  coaches,  carriages,  sad- 
dlery and  harness,  and  sporting  goods ;    coal  and  wood ;    also  wines, 
liquors,  mineral,  aerated  and  other  waters,  cigars  and  tobacco  and 
refreshments  generally,  as  well  as  produce  of  any  and  all  kinds ; 
milk,  cream,  butter,  eggs  and  cheese,  and  dairymen's  products  gen- 
erally ;   flowers,  birds,  and  domestic  animals ;   photographs  and  pho- 
tographers' supplies  generally;    and,  without  limitation,  all  natural 
products,  and  all  manufactured  goods  and  materials ;   as  well  as  all 
other  things  which  are  usually  or  which  may  be  properly  dealt  with 
in  a  department  store. 

(2)  To  alter,  repair,  exchange,  store,  transport,  hire,  or  lease  any 
of  the  articles  or  things  hereinabove  mentioned ;    and  to  make  and 
carry  out  contracts  with  reference  thereto;    and  to  print  such  ad- 
vertising and  other  literature  as  may  properly  be  used  as  an  adjunct 
to  a  department  store. 

(3)  To  establish  and  conduct  cafe's,  soda  fountains,  reading  and 
writing  rooms,  retiring  rooms,  lounging  rooms,  dressing  rooms,  tele- 
phones, and  other  conveniences  for  the  use  of  customers  and  others. 

(4)  To  permit  other  persons  or  corporations  to  carry  on  any  kind 
of  business  on  the  premises  of  this  corporation  on  such  terms  as  to  it 
may  seem  expedient  and  proper. 

(72) 


Ch.  3)  CERTIFICATE    OF    INCORPORATION.  §  84g 

§  84e.     Contracting  Company. 

To  establish  and  conduct  the  business  of  contracting  and  con- 
struction in  all  of  its  branches,  and  to  this  end  to  execute,  deliver 
and  carry  out  contracts  for  building,  fitting  up,  reconstructing,  alter- 
ing, improving,  decorating,  furnishing  and  removing  all  kinds  of 
buildings  and  structures ;  contracts  for  earthwork  generally  above 
and  below  ground,  for  water  works  and  courses,  hydraulic  works, 
and  for  the  building  of  piers,  wharves  and  docks ;  for  draining  and 
reclaiming  lands  either  totally  or  partially  covered  by  water;  and 
all  other  contracts  of  whatsoever  kind  which  are  usually  or  which 
may  properly  be  incident  to  the  business  aforesaid :  and  for  the 
more  effectual  prosecution  of  such  business,  the  said  corporation 
shall  have  power  to  borrow  and  advance  money,  acquire  and  dispose 
of  real  and  personal  property,  to  cultivate  crops  and  to  use  or  sell 
the  same,  and  to  do  all  other  acts  necessary  or  proper  to  the  con- 
venient conduct  of  the  business  aforesaid. 

§  84f.     Mining  Company. 

To  enter,  acquire,  own,  or  lease  mines,  mineral  lands,  and  mining 
claims  of  any  and  every  kind,  and  any  interest  in  or  concerning 
same,  and  to  prosecute,  work,  and  develop  the  same,  either  for  itself, 
or  for  other  persons  or  corporations,  upon  such  terms  and  for  such 
remuneration  as  it  shall  deem  fit  or  proper;  and  in  connection  with 
the  working  of  such  mines,  and  the  products  of  ores  and  minerals 
therefrom,  to  reduce  all  such  ores  and  minerals  to  profitable  mer- 
chantable value,  and  to  sell,  exchange,  or  otherwise  dispose  of  the 
same;  and  in  connection  therewith  to  contract  for,  build,  buy,  or 
otherwise  acquire,  own,  operate,  and  dispose  of,  all  necessary  build- 
ings, mill  sites,  water  rights,  mills,  smelters,  machinery,  roads,  rail- 
roads, tramways,  terminal  facilities,  ditches,  flumes,  and  such  other 
property  as  may  be  necessary  and  proper  to  its  corporate  objects ; 
and  to  acquire,  own,  control,  or  dispose  of  stock  of  other  corpora- 
tions ;  and  to  engage  in  trade  of  every  kind  as  well  as  in  transporta- 
tion; and  to  do  everything  else  that  may  be  directly  or  indirectly 
conducive  to  any  of  the  objects  of  the  company ;  as  well  as  to  con- 
tribute to,  subsidize,  or  otherwise  aid  or  take  part  in  any  such  opera- 
tions. 

§  84g.     Apartment  House  Company. 

To  acquire  by  purchase,  gift,  lease,  exchange,  or  otherwise,  real 
and  personal  property  or  either,  or  any  interest  or  estate  therein, 
and  any  rights  over  or  connected  therewith;  and  to  lease,  sell,  or 

(73) 


§  85  BUSINESS    CORPORATIONS.  (Ch.  3 

otherwise  part  with  or  incumber  the  same;  to  turn  the  same  to  ac- 
count as  may  seem  expedient;  and  in  particular  to  prepare  building 
sites,  and  to  construct,  reconstruct,  alter,  improve,  decorate,  furnish, 
and  maintain  buildings  for  hotel  purposes,  dwelling  and  apartment 
houses,  and  other  structures  for  the  accommodation  of  the  public 
and  of  individuals ;  to  occupy,  manage,  conduct,  and  carry  on  hotels, 
apartment  houses,  dwelling  houses,  restaurants,  and  places  for  ac- 
commodation of  the  public  and  of  individuals,  whether  such  build- 
ings or  places  belong  to  this  corporation  or  not :  and  to  collect  rents 
and  incomes,  and  to  supply  to  tenants  and  others  attendance,  mes- 
sengers, light,  heat  and  power,  and  all  other  conveniences  and  ad- 
vantages; and,  in  connection  with  the  objects  hereinabove  enumer- 
ated, to  establish  and  conduct,  and  permit  the  establishment  and 
operation  of,  any  business  which  may  be  conveniently  carried  on, 
and  the  establishment  of  which  may  be  directly  or  indirectly  con- 
ducive to  any  of  the  objects  of  the  corporation ;  as  well  as  to  con- 
tribute to,  subsidize,  or  otherwise  aid  or  take  part  in  any  such 
operations. 

CLAUSES  REGULATING  BUSINESS. 

§  85.     Executive  Committee. 

There  may  be  an  executive  committee,  composed  o.f  such  members 
of  the  board  of  directors  as  may  be  prescribed  by  the  by-laws,  the 
members  of  said  committee  to  be  designated  by  said  board  by  resolu- 
tion passed  by  a  majority  thereof,  which  committee  shall  have  and 
may  exercise  all  the  powers  conferred  upon  the  board  of  directors 
by  law  or  by  the  charter  or  by-laws  of  this  corporation,  either  be- 
tween the  meetings  of  the  board  of  directors,  or  at  any  meetings  of 
such  board  when  a  quorum  thereof  shall  not  be  present.  The  execu- 
tive committee  shall  have  power  to  elect  its  own  officers,  to  prescribe 
regulations  for  the  conduct  of  its  business,  and  to  fix  the  number 
necessary  to  constitute  a  quorum.  The  compensation  of  the  members 
of  the  executive  committee  shall  be  fixed  by  the  stockholders,  and 
their  terms  of  office  shall  be  co-extensive  with  their  terms  of  office 
as  directors. 

§  85a.     Action  Taken  Outside  of  Meeting. 

Whenever  any  resolution  in  writing  may  be  signed,  or  any  proposed 
action  acquiesced  in  in  writing  by  all  the  members  of  the  board  of 
directors  or  the  executive  committee,  such  resolution  or  proposed 
action  shall  be  taken  and  considered  to  be  the  act  of  the  board  of 
directors,  or  the  executive  committee,  as  the  case  may  be,  with  the 
(74) 


Cll.  3)  CERTIFICATE    OF    INCORPORATION.  §  85c 

same  force  and  effect  as  If  the  same  had  been  duly  approved  by  the 
same  vote  at  a  meeting  of  the  board  or  of  the  executive  committee, 
respectively,  duly  called  and  convened;  and  it  shall  be  the  duty  of 
the  secretary  of  the  company  to  cause  such  action  to  be  recorded  in 
the  minute  book  of  the  company  with  the  same  particularity  as  if 
it  had  been  so  approved. 

§  85b.     Power  of  Directors  to  Sell  Business  as  an  Entirety. 

The  board  of  directors  shall  have  power  to  sell,  assign,  transfer, 
convey,  or  otherwise  dispose  of  the  whole  or  any  part  of  the  prop- 
erty or  assets  of  the  corporation  as  an  entirety  or  going  concern, 
either  for  cash,  or  in  exchange  for  other  property  or  securities,  on 
such  terms  and  conditions  as  they  may  deem  proper  and  fair  to  the 
interests  of  the  stockholders. 

§  85c.     Cumulative  Voting. 

In  all  elections  for  directors,  each  stockholder  shall  have  the 
right  to  vote  the  number  of  shares  of  stock  owned  by  him  for  as 
many  persons  as  there  are  directors  to  be  elected,  or  to  cumulate 
said  votes  and  give  one  candidate  as  many  votes  as  the  number  of 
directors  multiplied  by  the  number  of  his  shares  of  stock  shall  equal, 
or  to  distribute  them  on  the  same  principle  among  as  many  candi- 
dates as  he  shall  think  fit. 

(75) 


§  86  BUSINESS   CORPORATIONS.  (Ch.  4 

CHAPTER  IV. 

ESSENTIALS   OF   INITIAL   MEETINGS   OF    INCORPORATORS. 

§  86.  Commencement  of  Corporate  Life. 

87.  Place  of  Holding  Initial  Meeting. 

88.  Proxy  for  Initial  Meeting. 

89.  Time  for  Holding  Initial  Meeting. 

90.  Waiver  of  Notice. 

91.  Notice  of  Meeting  for  Assessment 
91a.  Waiver  of  Notice  of  Assessment. 

92.  Notice  of  Meeting  to  Increase  Capital  Stock. 

92a.  Waiver  of  Notice  of  Meeting  to  Increase  Capital  Stock. 

93.  Papers  to  be  Prepared  in  Advance. 

94.  Transfer  of  Subscription. 

95.  General  Notice  of  Meeting. 
95a.  Requisites  of  Notice. 

95b.  Form  of  Notice. 

95c.  Notice  by  Publication. 

95d.  Manner  of  Publication. 

96.  Quorum. 

§  86.     Commencement  of  Corporate  Life. 

It  is  frequently  provided  by  statute  that  the  existence  of  a 
corporation  shall  commence  with  the  filing  of  the  certificate. 
In  the  absence  of  statute  the  general  rule  is  that  the  corpora- 
tion is  "deemed  to  exist  from  the  time  when  the  certificate  of 
incorporation  prescribed  by  the  governing  statute  is  executed, 
acknowledged,  and  recorded,  or  filed  for  record,  in  accordance 
with  the  governing  statute."  *  This  rule,  however,  must  be 
understood  with  some  qualifications.  If  the  corporation  per- 
fects its  organization  properly,  no  doubt  its  existence  will  be 
held  to  date  back  to  the  time  of  the  filing  of  the  certificate. 
But  if  it  should  happen  that  the  initial  meeting  for  the  pur- 
pose of  organization  should  be  held  outside  the  state  confer- 
ring the  charter,  then,  in  accordance  with  a  long  line  of  author- 

1 10  Cyc.  223. 
(76) 


Ch.  4)  INITIAL   MEETING   OF    INCORPORATORS.  §  87 

ities,  it  might  well  be  held  in  a  proper  proceeding  that  the 
corporation  never  was  validly  organized,  and  that  the  alleged 
stockholders  therein  are  liable  as  partners.2  It  becomes  there- 
fore important  to  know  where  the  initial  meeting  must  be  held, 
and  what  the  consequences  of  holding  such  meeting  in  a  dif- 
ferent place  would  be. 

§  87.     Place  of  Holding  Initial  Meeting. 

It  is  a  fundamental  principle  of  corporation  law  that  the 
meetings  of  stockholders  must  be  held  within  the  limits  of 
the  state  creating  the  corporation.3  In  this  connection  the 
same  distinction  has  been  drawn  between  meetings  for  the 
purpose  of  performing  "constituent"  acts  and  those  which  do 
not,  as  has  been  drawn  in  the  case  of  directors'  meetings.4 
But  it  is  obvious  that  the  first  meeting  of  incorporators  must 
be  one  for  the  purpose  of  doing  constituent  acts.  It  is  at  this 
meeting  that  directors  are  elected,  by-laws  adopted,  and  other 
things  done  which  permit  the  corporation  to  start  out  upon  its 
career.  Accordingly  it  has  been  held  in  a  number  of  cases 
that  so-called  corporations  whose  initial  meetings  have  been 
held  beyond  the  borders  of  the  parent  state  are  dead  things 
ab  initio,  having  never  had  breathed  into  them  the  breath  of 
life.  The  structures  have  been  created,  but  no  spark  of  vital- 
ity has  ever  been  infused  into  them.5 

2  Hill  v.  Beach,  12  N.  J.  Eq.  31 ;  Duke  v.  Taylor,  37  Fla.  64,  19 
South.  172,  31  L.  R.  A.  484,  53  Am.  St.  Rep.  232 ;  Bigelow  v.  Gregory, 
73  111.  197 ;  Williams  v.  Hewitt,  47  La.  Ann.  1076,  17  South.  496,  49 
Am.  St.  Rep.  394 ;  Owen  v.  Shepard,  59  Fed.  746,  8  C.  C.  A.  244. 

s  2  Cook,  Corp.  §  589. 

*  Supra,  c.  Ill ;    10  Cyc.  320. 

6  Smith  v.  Mining  Co.,  64  Md.  85,  20  Atl.  1032,  54  Am.  Rep.  760 ; 
Miller  v.  Ewer,  27  Me.  509,  46  Am.  Dec.  619;  Bank  of  Augusta  v. 
Earle,  13  Pet.  (U.  S.)  519.  10  L.  Ed.  274;  Franco-Texan  Land  Co.  v. 
Laigle.  59  Tex.  339 ;  Montgomery  v.  Forbes,  148  Mass.  249,  19  N.  E. 
342 ;  Hill  v.  Beach,  12  N.  J.  Eq.  31 ;  Duke  v.  Taylor,  37  Fla.  64,  19 
South.  172,  31  L.  R.  A.  484,  53  Am.  St.  Rep.  232 ;  Hodgson  v.  Railroad 
Co.,  46  Minn.  454,  49  N.  W.  197;  Freeman  v.  Mill  Co.,  38  Me.  343; 
Tones  v.  Mining  Co.,  20  Colo.  417,  38  Pac.  700. 

(77) 


§  87a  BUSINESS  CORPORATIONS.  (Ch.  4 

§  87a.  The  question  of  the  validity  or  invalidity  of  the 
corporate  organization  under  such  circumstances  will  never- 
theless seldom  be  inquired  into  by  the  courts,  and  the  corpora- 
tion will  be  generally  treated  as  existing  de  facto  if  not  de 
jure.  The  party  seeking  to  raise  the  question  will  generally 
be  estopped  from  so  doing.  For  instance,  a  corporation  itself 
will  be  estopped  from  attacking  its  own  existence.8  So,  also, 
are  the  stockholders  who  participate  in  the  meeting.7  Persons 
dealing  with  a  de  facto  corporation  as  such  are  estopped  to 
deny  its  corporate  existence.8 

§  87b.  There  are,  however,  cases  where  such  irregulari- 
ties might  be  shown.  The  state  may  always,  in  a  direct  pro- 
ceeding for  that  purpose,  obtain  a  judgment  of  ouster.9  The 
question  has  been  raised  in  a  proceeding  by  stockholders  to 
enjoin  a  corporation  from  forfeiting  stock  for  the  nonpayment 
of  assessments  thereupon.10  In  the  case  cited  in  the  note  it 
appeared  that  a  special  charter  had  been  granted  by  the  Leg- 
islature of  North  Carolina,  which  was  accepted  at  a  meeting 
of  the  incorporators  held  in  the  city  of  Baltimore,  Md.,  where 
they  elected  a  president,  secretary,  and  treasurer,  adopted  a 
seal,  and  performed  all  the  necessary  acts  leading  up  to  the 
organization  of  the  company  for  the  purpose  of  doing  business. 
Apparently  neither  party  raised  the  question  of  the  illegality 
in  the  original  meeting  of  incorporators,  the  complainant 
claiming  merely  that  the  meeting  of  directors  held  in  Mary- 
land at  which  the  forfeiture  was  declared  was  a  nullity.  But 

«  Heath  v.  Smelting  Co.,  39  Wis.  146 ;  Southern  Bank  v.  Williams,. 
25  Ga.  534;  Dooley  v.  Glass  Co.,  15  Gray  (Mass.)  494;  10  Cyc.  249, 
and  cases  cited. 

T  Camp  v.  Byrne,  41  Mo.  525 ;  Ohio  &  M.  R.  Co.  v.  McPherson,  35 
Mo.  13,  80  Am.  Dec.  128 ;  Ormsby  v.  Copper  Co.,  56  N.  Y.  623 ;  Hand- 
ley  v.  Stutz,  139  U.  S.  417,  11  Sup.  Ct.  530,  35  L.  Ed.  227;  10  Cyc.  24!  >. 

s  Ohio  Nat.  Bank  of  Washington  v.  Construction  Co.,  17  App.  D. 
C.  524;  Oregonian  R.  Co.  v.  Navigation  Co.  (C.  C.)  22  Fed.  248;  10 
Cyc.  245-248,  and  cases  cited. 

»  10  Cyc.  1291 ;    1  Clark  &  M.  Corp.  §§  70,  71,  81,  93. 

10  Smith  v.  Mining  Co.,  64  Md.  85,  20  Atl.  1032,  54  Am.  Rep.  760. 
(78) 


Cll.  4)  INITIAL    MEETING    OF    INCORPORATORS.  §  87d 

the  court,  of  its  own  motion,  went  back  to  the  original  irregu- 
larity in  not  holding  the  initial  meeting  in  North  Carolina,  and 
held  that  the  corporation  had  no  legal  existence,  and  dismissed 
the  bill  of  complaint  upon  that  ground. 

§  S7c.  In  the  case  of  Miller  v.  Ewer,*  which  was  an  action 
of  ejectment,  the  plaintiffs  claimed  title  through  a  deed  from  a 
company  which  had  received  a  charter  from  the  state  of  Maine, 
but  which  held  its  meeting  for  organization  in  the  city  of 
New  York,  where  the  charter  was  accepted.  It  was  held  that, 
inasmuch  as  all  subsequent  proceedings  were  based  upon  this 
extraterritorial  meeting,  no  deed  could  have  been  either  author- 
ized or  delivered  by  this  company,  which,  because  of  such  extra- 
territorial initial  meeting,  never  had  a  legal  existence. 

§  87d.  In  Duke  v.  Taylor  f  the  "Florida  Orange  Hedge 
Fence  Company"  executed  its  negotiable  promissory  note  sign- 
ed by  said  name,  "by  its  Pres.,  Jno.  W.  Childress,  James  A. 
Knox,  as  Secretary  and  Treasurer."  This  note  came  into  the 
hands  of  the  plaintiff  for  value  before  maturity.  At  maturity, 
the  note  remaining  unpaid,  the  holder  filed  his  suit  against  six- 
teen persons,  comprising  said  alleged  company,  seeking  to  hold 
them  liable  upon  the  note  as  partners.  The  evidence  showed 
that  the  state  of  Tennessee  had  granted  a  charter  to  these 
defendants  under  its  general  laws,  but  that  the  meeting  for  or- 
ganization had  been  convened  in  the  state  of  Florida.  The 
court  held  that  no  valid  organization  had  taken  place.  It  also 
held  that  the  holder  of  the  note  was  not  estopped  to  deny 
the  corporate  existence,  for  the  reason  that  the  note  contained 
"no  recital  that  the  company  in  whose  name  it  was  executed 
was  a  corporation,"  and  there  was  nothing  to  overcome  the  evi- 
dence of  the  plaintiff  that  he  did  not  know  that  the  company 
was  a  corporation  when  he  received  the  note,  and  that  it  did 
not  appear  that  he  "contracted  with  or  dealt  with  the  company 
as  a  corporation." 

*  27  Me.  509.  4G  Am.  Dec.  619. 

t  37  Fla.  64,  19  South.  172,  31  L.  R.  A.  484.  53  Am.  St.  Rep.  232. 

(79) 


§  87e  BUSINESS   CORPORATIONS.  (Cll.  4. 

§  87e.  As  we  have  heretofore  had  occasion  to  point  out,  in 
many  states  the  statutes  expressly  permit  the  stockholders' 
meetings  to  be  held  outside  of  the  state  granting  the  charter, 
and  in  some  of  them  it  is  enacted  that  even  the  initial  meet- 
ing may  be  so  held.  Few  cases  have  arisen  in  which  the  va- 
lidity of  such  statutes  has  been  called  into  question.  Upon  gen- 
eral principles  it  would  seem  that  the  courts  of  no  state  are 
.bound  to  recognize  as  a  corporation  individuals  who,  residing 
elsewhere,  merely  file  articles  of  incorporation  in  a  given  po- 
litical territory  without  themselves  at  any  time  coming  within 
its  jurisdiction.  If  citizens  of  New  York  may  take  advantage 
of  the  New  Jersey  laws  for  the  purpose  of  incorporation,  the 
laws  of  the  latter  state  being  more  favorable  for  certain  pur- 
poses than  those  of  their  own,  then  upon  the  same  principles 
it  would  seem  equally  competent  for  these  persons  to  seek 
to  protect  themselves  from  liability  for  their  acts  by  pretending 
to  avail  themselves  of  the  laws  of  China  or  Corea.  Under 
the  broad  principles  which  now  prevail  recognizing  the  right 
of  corporations  legally  created  in  one  jurisdiction  to  transact 
business  in  another,  it  is  quite  possible  that  even  the  laws 
of  China  or  Corea  might  confer  corporate  privileges,  provided 
such  nation  once  acquired  jurisdiction  for  this  purpose.11 
Having  acquired  jurisdiction,  it  might  then  send  out  its  cor- 
porations into  other  countries,  with  powers  which  would  be 
elsewhere  recognized  under  principles  of  international  comity,- 
even  with  the  power  to  hold  corporate  meetings  to  perform 
constituent  acts  elsewhere.  But,  in  order  that  that  jurisdiction 
should  once  attach,  it  would  seem  that  the  initial  meeting  of 
the  incorporators  should  be  held  within  the  state  which  con- 
fers the  corporate  privileges.  After  that  there  is  little  practical 

11  Liverpool  &  L.  Life  &  Fire  Ins.  Co.  v.  Massachusetts,  10  Wall. 
(U.  S.)  5G6,  19  L.  Ed.  1029;  Gen.  Corp.  Act  N.  J.  §  95.  as  amended 
by  P.  L.  1903,  c.  22;  King  v.  Sarria,  69  N.  Y.  24,  25  Am.  Rep. 
128;  Oregonian  R.  Co.  v.  Navigation  Co.  (C.  C.)  23  Fed.  232;  re- 
versed on  another  point,  Oregon  R.  &  Nav.  Co.  v.  Railroad  Co.,  130 
U.  S.  1,  9  Sup.  Ct  409,  32  L.  Ed.  807 ;  Merrick  v.  Van  Santvoord,  34 
N.  Y.  208. 
(80) 


Ch.  4)  INITIAL    MEETING    OF    INCORPORATORS.  §  88 

danger  that  the  question  of  the  right  to  hold  stockholders' 
meetings  elsewhere  could  be  attacked  with  much  success.  Cer- 
tainly the  state  which  by  its  legislation  permits  this  very  thing 
to  be  done  could  not  question  it.  No  more  could  the  corpora- 
tion itself,  or  a  stockholder  or  a  creditor  contracting  with 
the  company  as  a  corporation.  Certain  expressions  used  in  the 
opinions  in  the  cases  cited  in  the  note  seem  to  countenance  this 
doctrine.12 

§  87f.  It  is  quite  probable,  though  by  no  means  settled,  that 
a  court  in  another  state  would  give  effect  to  the  statutory 
power  conferred  upon  a  corporation  of  holding  its  stock- 
holders' meetings  beyond  the  limits  of  the  state  conferring 
the  charter,  and  would  not  raise  the  question,  as  they  did  in 
Smith  v.  Silver  Valley  Min.  Co.,|  or  permit  it  to  be  raised 
by  a  third  party,  as  in  Camp  v.  Byrne.** 

§  87g.  When  the  incorporators  or  a  majority  of  them  are 
nonresident,  it  is  a  common  practice,  and  one  which  has 
never  been  successfully  assailed,  for  these  persons  to  send  their 
proxies  to  parties  within  the  state,  or  to  deliver  them  to  per- 
sons who  journey  to  the  state  for  the  purpose  of  holding  the 
initial  meeting.  It  has  been  held  that  there  must  be  at  least 
two  persons  present,  for  otherwise  the  term  "meeting"  would 
be  a  misnomer.13  A  simple  form  of  proxy  for  this  purpose 
would  be  as  follows : 

§  88.     Proxy  for  Initial  Meeting. 

The   undersigned,   one  of  the   incorporators  of  the    

Company    (a    subscriber    to    shares    of   stock   therein), 

12  Duke  v.  Taylor,  37  Fla.  64,  19  South.  172,  31  L.  R.  A.  484,  53 
Am.  St.  Rep.  232;  Jones  v.  Mining  Co..  20  Colo.  417.  38  Pac.  700: 
Graham  v.  Railroad  Co..  118  U.  S.  161,  6  Sup.  Ct.  1009,  30  L.  Ed.  196 ; 
Craig  Silver  Co.  v.  Smith.  163  Mass.  262,  39  N.  E.  1116. 

J  64  Md.  85.  20  Atl.  1032,  54  Am.  Rep.  760. 

**41  Mo.  525. 

is  Sharpe  v.  Dawes,  2  Q.  B.  D.  26:     In   re  Sanitary  Carbon  Co. 

(1877)  12  \Ykly.  Notes,  223:   2  Cook.  Corp.  bot.  p.  1298.     Contra:   Mor- 

rill  v.  Manufacturing  Co.,  53  Minn.  371.  55  N.  W.  547,  21  L.  R.  A.  174. 

CLEPH. Bus. CORP. — 6 


§  89  BUSINESS    CORPORATIONS.  (Ch.  4 

hereby   constitutes  and   appoints    as  proxy,  with   full 

power  of  substitution  and  revocation,  to  vote  for  and  in  the  name  of 
the  undersigned  at  the  initial  meeting  of  the  incorporators  of  said 

company  to  be  held  at    on  the   day  of 

,  A.  D.  19..,  and  at  any  adjournment  thereof,  giving 

and  granting  unto  said  proxy  full  power  to  act  for  and  on  behalf  of 
the  undersigned  in  the  transaction  of  any  business  which  may  legal- 
ly come  before  said  meeting,  to  the  same  extent  as  the  undersigned 
could  do  if  personally  present. 

In   testimony  whereof   the  undersigned   has  hereunto   signed  his 

name  and  affixed  his  seal  this   day   of   , 

A.  D.  19. .. 

[Seal.] 

Witness:   . 


§  89.     Time  of  Holding  Meeting. 

Many  of  the  states  provide  a  maximum  or  minimum  time 
or  both  after  the  filing  of  the  certificate  when  the  initial  meet- 
ing of  the  incorporators  must  be  held.  Such  statutes  should  be 
carefully  followed.  In  the  absence  of  such  legislation,  all  that 
is  required  is  that  the  meeting  be  held  within  a  reasonable  time 
after  the  certificate  is  filed. 

§  89a.  Even  where  the  time  for  the  meeting  is  limited  by 
law,  it  is  quite  competent  for  such  requirement  to  be  waived, 
provided  all  the  incorporators  unite  in  the  waiver.14  This 
waiver,  in  order  to  be  effectual,  must  be  absolutely  unanimous, . 
although  all  of  the  incorporators  need  not  sign  a  paper  to' 
that  effect,  their  presence  and  participation  without  objection 
in  the  meeting  constituting  a  sufficient  waiver.18 

§  90.     Waiver   of   Notice  of   Initial   Meeting  of   Incorpo- 
rators. 

The  undersigned,  incorporators  and  subscribers  to  the  capital  stock 
of  the Company,  a  corporation  created  under  the  laws 

i*  Braintree  Water-Supply  Co.  v.  Braintree,  146  Mass.  482,  16  N.  E. 
420 ;  2  Cook,  Corp.  §  599. 

IB  Handley  v.  Stutz,  139  U.  S.  417,  11  Sup.  Ct.  530,  35  L.  Ed.  227; 
(82) 


Ch.  4)  INITIAL    MEETING    OF    INCORPORATORS.  §  91a 

of  the  state  of   do  hereby  waive  legal   notice  of  the 

time,  place,  and  purpose  of  the  initial  meeting  of  such  incorporators 
and  subscribers,  and  do  hereby  call  said  meeting  to  be  held  at 

,  in  the  state  of ,  on  the day 

of   ,  A.   D.  19. .,  at  the  hour  of   o'clock  in  the 

noon,  and  we  consent  that  at  such  meeting  any  and  all  busi- 
ness which  may  pertain  to  the  affairs  of  the  company  may  be  trans- 
acted. 

In   testimony    whereof   we    have   signed    these   presents   on   this 
day  of ,  A.  D.  19... 


Witness: 


§  91.     Notice  of  Meeting  for  Assessment. 

It  is  generally  required  that  before  an  assessment  can  be 
levied  upon  the  stock  subscribed  for  there  must  be  notice  given 
for  a  certain  length  of  time,  either  by  publication  or  in  some 
other  manner.  This  requirement  may  also  be  waived  by  a  docu- 
ment signed  by  all  parties  interested,  in  the  following  or  equiv- 
alent form : ie 

§  9 la.     Waiver  of  Notice  of  Assessment. 

The  undersigned,  subscribers  to  the  capital  stock  of  the 

<  'ornpany,  a  corporation  created  under  the  laws  of  the  state  of 

,  do  hereby  waive  all  legal  notice,  by  publication  or 

otherwise,  of  the  time,  place,  and  manner  of  making  payment  of 
our  several  subscriptions,  and  of  the  meeting  to  determine  the  same, 
nnd  we  hereby  severally  agree  to  pay  any  part  or  all  of  the  same  at 
such  time  or  times,  and  in  such  amounts,  as  the  ooard  of  directors 
may  in  its  discretion  designate. 

In  testimony  whereof  we  have  signed  these  presents  this 

day  of ,  A.  D.  19... 


Witness: 


3  Clark  &  M.  Corp.  §  047 ;    1  Cyc.  329,  and  cases  cited ;   2  Cook,  Corp. 
§  599. 

!«  See  §  89a,  and  note. 

(83) 


§  92  BUSINESS   CORPORATIONS.  (Ch.  4 

§  92.     Notice  of  Meeting  to  Increase  Capital  Stock. 

Inasmuch  as  at  the  first  meeting  of  incorporators  it  may  be 
deemed  desirable  to  authorize  the  directors  to  issue  stock  be- 
yond the  amount  fixed  as  that  with  which  the  company  shall 
start  in  business,  and  as  the  statutes  of  many  states  require 
certain  formalities  by  way  of  notice,  advertisement,  etc.,  before 
this  can  be  done,  a  waiver  of  these  formalities  may  also  be  ob- 
tained in  a  form  similar  to  that  which  follows : 1T 

§  92a.    Waiver  of  Notice  of  Meeting  to  Increase  Capital 
Stock. 

The  undersigned,  incorporators  and  subscribers  to  the  capital  stock 

of  the Company,  a  corporation  created  under  the  laws 

of  the  state  of do  hereby  waive  all  legal  and  statutory 

requirements  as  to  notice  of  the  time  and  place  of  the  meeting  for 
the  purpose  of  considering  a  proposition  to  increase  the  company's 
capital  stock,  and  the  number  of  shares  thereof,  and  do  consent  that 
such  matters  may  be  considered  at  a  meeting  of  the  incorporators 

and  subscribers  to  the  capital  stock  to  be  held  at  ,  in 

the  city  of  ,  on  the  day  of  

A.  D.  19. .,  at  the  hour  of o'clock  in  the noon ;  and  do 

also  consent  and  agree  that  at  said  meeting  or  any  other  meeting 
the  board  of  directors  may  be  authorized  and  directed  to  take  ap- 
propriate action  in  that  regard,  and  from  time  to  time  issue  such 
additional  shares  as  they  may  deem  proper,  up  to  the  maximum 
amount  of  the  capital  stock  limited  by  the  charter. 

In  testimony  whereof  we  have  signed  these  presents  this 

day  of ,  A.  D.  19... 


Witness: 


§  93.     Papers  Prepared  in  Advance. 

The  general  practice  is  for  the  attorney  of  the  corporation 
to  prepare,  prior  to  the  first  meeting  of  the  incorporators, 
proxies  similar  to  the  form  given  above,  to  be  signed  by  those 
who  cannot  be  present,  accompanied  by  such  waivers  as  may 
be  needed. 

IT  10  Cyc.  541.    See  supra,  §  S9a,  and  note. 
(84) 


Ch.  4)  INITIAL    MEETING    OF    INCORPORATOKS.  §  95a 

§  94.     Transfer  of  Subscription. 

Should  any  subscriber,  before  stock  is  issued  to  him,  desire 
to  transfer  his  rights  in  such  stock  to  another  person,  as  is 
frequently  done  prior  to  the  initial  meeting,  he  may  do  this 
by  a  document  substantially  like  the  one  following:  18 

§  94a.     Form  of  Transfer  of  Subscription. 

Know  all  men  by  these  presents,  that  the  undersigned,  for  value 
received,  has  sold,  assigned,  transferred,  and  set  over,  and  by  these 

presents  does  sell,  assign,  transfer,  and  set  over,  unto , 

all  the  right,  title,  and  interest  of  the  undersigned,  as  an  incorpo- 

rator  of,  or  subscriber  to  the  stock  of,  the  Company, 

a  corporation  created  under  the  laws  of  the  state  of  , 

to  the  extent  of  shares  thereof,  and  hereby  requests 

the  said  company  to  issue  a  certificate  for  the  number  of  shares 

last  aforementioned  to  the  said or  his  assigns,  instead 

of  to  the  undersigned. 

In  testimony  whereof  the  undersigned  has  hereunto  set  his  name 

and  affixed  his  seal  this  day  of  A.  D. 

19... 

Witness: [Seal.] 

The  said  transfer  is  hereby  assented  to  by  this  company. 

Company, 

By ,  President. 

§  95.     Notice  of  Meeting. 

If  for  any  reason  it  is  not  practicable  to  procure  the  waiver 
above  mentioned  from  all  of  the  incorporators,  and  those  from 
whom  waivers  cannot  be  procured  will  be  absent  from  the 
meeting,  it  is  of  the  highest  importance  that  the  proper  notice 
of  the  initial  meeting  should  be  given  to  each  and  every  incor- 
porator  and  subscriber  to  the  stock.  Otherwise  the  action 
taken  thereat  would  be  invalid.19 

§  95a.     Requisites  of  Notice. 

If  a  statutory  mode  of  giving  notice  is  fixed,  that  mode  must 
be  followed ;  if  not,  the  requisites  of  the  notice  may  be  said 

is  Manchester  St.  Ry.  Co.  v.  Williams.  71  X.  H.  312,  52  Atl.  461. 
is  10  Cyc.  323,  324;   3  Cook,  Corp.  §  594. 

(85) 


§  95b  BUSINESS   CORPORATIONS.  (Ch.  4 

to  be  five  in  number.  First,  it  must  be  issued  by  one  who  has 
authority  to  issue  it;  second,  it  must  be  issued  a  reasonable 
length  of  time  before  the  meeting  is  to  be  held ;  third,  it  must 
state  the  time  of  the  meeting,  unless  this  is  fixed  in  the  char- 
ter; fourth,  it  must  state  the  place  where  the  meeting  is  to 
be  held,  unless  this  is  fixed  in  the  charter ;  fifth,  it  must  state 
the  business  to  be  transacted  thereat.20  The  following  form  of 
notice  will  suffice : 

§  95b.     Form  of  Notice. 

New  York  City ,  19... 

Mr.  John  Doe,  422  Fourth  St.,  N.  W.,  Washington,  D.  C. 
Dear  Sir:    You  are  hereby  notified  that  the  initial  meeting  of  the 

incorporators  and  subscribers  to  the  capital  stock  of  the 

Company,  a  corporation  created  under  the  laws  of  the  state  of  New 

York,  will  be  held  at ,  in  the  city  of  New  York,  on  the 

day  of   ,  A.  D.   19..,   for  the  purpose  or 

transacting  any  and  all  business  which  may  legally  come  before  sucL 
initial  meeting. 

,  Secretary. 

§  95c.     Notice  by  Publication. 

If  notice  is  required  to  be  published,  and  no  particular  form  is 
set  forth  in  the  statute,  the  following  form  would  answer: 

Notice  is  hereby  given  that  the  initial  meeting  of  the  incorporators 

and  subscribers  to  the  capital  stock  of  the   Company, 

a  corporation  created  under  the  laws  of  the  state  of  New  York,  will 

be  held  at ,  in  the  state  of  New  York,  on  the 

day  of ,  A.  D.  19. .,  for  the  purpose  of  transacting  any 

and  all  business  which  may  legally  come  before  such  initial  meeting. 

,  Secretary. 

§  95d.     Manner  of  Publication. 

This  notice  should  be  published  in  such  number  of  news- 
papers for  such  length  of  time  and  at  such  intervals  as  the 
statute  prescribes. 

203  Clark  &  M.  Corp.  §§  647,  648 ;  10  Cyc.  324,  325 ;  2  Cook,  Corp. 
§  595. 

(86) 


Ch.  4)  INITIAL   MEETING   OF   INCORPORATORS.  §  96b 

§  96.     Quorum. 

At  common  law  the  rule  seems  to  be  that,  except  where  the 
rule  of  voting  is  by  shares,  those  incorporators  and  subscribers 
who  attend  a  duly  called  meeting  may  transact  the  business  of 
that  meeting,  although  a  majority  in  interest  or  in  number  is 
not  present.21 

§  96a.  If  the  statute  or  charter,  however,  lays  down  a  dif- 
ferent rule,  in  order  that  business  done  at  such  meeting  may  be 
legal,  a  quorum  must  be  present.  Of  those  who  attend,  the 
majority  rule.22 

§  96b.  Most  modern  business  corporations  are  governed 
by  statutes  or  charters,  entitling  each  share  of  stock  to  one 
vote.  In  such  case  the  rule  above  announced  23  would  not  gov- 
ern. It  applies  only  to  bodies  composed  of  an  indefinite  number 
of  persons,  which  would  be  the  status  of  a  corporation  issuing 
shares  of  stock  which  may  be  assigned  at  will,  giving  each  cer- 
tificate holder  a  right  to  vote  irrespective  of  the  number  of 
shares  he  holds.  But  where  each  share  is  entitled  to  one  vote, 
as  is  now  generally  the  case,  the  number  of  possible  votes  is 
definitely  fixed,  and  a  majority  in  interest  must  be  present  in 
order  to  constitute  a  quorum.  Although  some  authority  is 
found  to  the  contrary,24  it  is  believed  that  it  would  not  be  safe 
to  proceed  with  the  initial  meeting  of  incorporators  unless  such 
majority  should  be  present  either  in  person  or  by  proxy.23 
And  there  must  be  at  least  two  persons  actually  present.26 

21  2  Cook,  Corp.  §  607 ;    3  Clark  &  M.  Corp.  p.  1981;    10  Cyc.  329; 
In  re  Rapid  Transit  Ferry  Co.,  15  App.  Div.  530,  44  N.  Y.  Supp.  539. 

22  id. 

23  Supra,  §  96. 

2*  In  re  Rapid  Transit  Ferry  Co.,  15  App.  Div.  530,  44  N.  Y.  Supp. 
539;  Morrill  v.  Manufacturing  Co.,  53  Minn.  371,  55  N.  W.  547,  21 
L.  R.  A.  147. 

25 10  Cyc.  346;  Haskell  v.  Read  (Neb.)  93  N.  W.  997. 

2a  Supra,  §  87g,  and  note, 

(87) 


97  BUSINESS   CORPORATIONS.  (Ch.  0 

CHAPTER  V. 

PROCEEDINGS  AT  FIRST  MEETING  OF  INCORPORATORS. 

§    97.    What  should  Appear  in  Minutes. 

98.  Chairman. 

99.  Roll  Call. 

100.  Reading  of  Notice,  Etc. 

101.  Acceptance  of  Charter. 

102.  Transfer  of  Subscriptions. 

103.  Adoption  of  By-Laws. 

105.  Election  of  Directors. 
105a.  Inspectors  of  Election. 

106.  Swearing  Inspectors. 

107.  Form  of  Inspectors'  Oath. 

108.  Counting  Ballots. 
108a.  Powers  of  Inspectors. 

109.  Inspectors'  Report. 

110.  Form  of  Inspectors'  Certificate. 

111.  Notary's  Certificate. 

Ilia.  Form  of  Notary's  Certificate. 

112.  Filing  Certificate. 

113.  Election  of  Officers. 

114.  Authority  to  Directors  to  Assess  Stock. 

115.  How  Payment  for  Stock  shall  be  Made. 
115a.  Exchange  of  Stock  for  Property. 

116.  Donating  Stock  Back  to  Treasury. 
116a.  Accepting  Proposition. 

116b.  Trustees  to  Hold  Treasury  Stock. 

117.  Authority  to  Issue  Stock  to  Incorporators. 

118.  Authority  to  Issue  Stock  to  Charter  Limit 

119.  Authority  to  Establish  Office,  Etc. 

120.  Corporate  Seal. 

121.  Authorizing  Form  of  Stock  Certificate. 

122.  Issue  of  Preferred  Stock. 

123.  Salaries  to  Officers. 
123a.  Directors  as  Officers. 

124.  Miscellaneous  Matters. 

125.  Adjournment. 

126.  Minutes. 
126a.          How  Kept 
126b.          Signature. 

127.  Form  of. 
(88) 


Cll.  5)  FIRST    MEETING    OF    INCORPORATORS.  §  100 

§  97.     What  should  Appear  in  Minutes. 

It  will  be  the  object  of  this  chapter  to  outline  clearly  those 
essential  proceedings  which  should  be  taken  by  the  incorpo- 
rators  at  their  meeting  held  for  the  purposes  of  organization. 
All  of  the  steps  indicated  should  be  clearly  set  forth  in  the 
minutes  of  the  meeting. 

§  98.     Chairman. 

Some  person  interested  in  the  corporation  assumes  the  chair, 
and  calls  for  nominations  for  the  office  of  chairman  of  the 
meeting.  A  chairman  having  been  elected,  a  secretary  is  next 
elected. 

§  99.     Roll  Call. 

The  roll  will  then  be  called  to  ascertain  how  many  of  the 
incorporators  and  subscribers  to  the  stock  are  present,  and  a 
memorandum  made  by  the  secretary  showing  who  are  present 
in  person  and  who  by  proxy.  At  the  time  the  roll  is  called  the 
person  holding  a  proxy  for  the  one  whose  name  is  mentioned 
will  answer  to  it  and  file  with  the  secretary  the  proxy;  or, 
if  preferred,  such  proxy  may  have  been  filed  with  the  secretary 
in  advance  of  the  meeting.  If  the  number  of  persons  in  at- 
tendance is  small,  instead  of  calling  the  roll  the  secretary 
might  call  upon  each  person  present  to  present  and  file  with 
him  whatever  proxies  he  holds,  thus  saving  time  in  this  way. 

§  100.     Reading  of  Notice,  Etc. 

If  the  meeting  has  been  convened  upon  formal  call,  the  call 
is  then  read;  if  pursuant  to  waivers  such  as  have  been  pre- 
sented in  the  preceding  chapter,  the  waivers  are  then  read  and 
ordered  spread  on  the  minutes.  It  is  not  necessary  that  these 
waivers  should  be  spread  upon  the  minutes,  but  by  so  doing  a 
permanent  record  is  kept  of  them,  which  may  be  found  con- 
venient for  future  use. 

(89) 


§  101  BUSINESS   CORPORATIONS.  (Ch.  5 

§  101.     Acceptance  of  Charter. 

If  the  corporation  has  received  a  special  charter  from  the 
legislature,  such  charter  should  then  be  read,  and  formally 
accepted  by  the  incorporators.1  If  the  corporation  has  been 
formed  pursuant  to  a  general  law,  it  is  usual,  but  not  neces- 
sary, at  this  stage  of  the  proceedings,  to  make  mention  of  the 
fact  that  the  certificate  of  incorporation  has  been  filed,  stating 
the  time  and  place  of  such  filing,  and  the  liber  and  folio  of 
the  record  where  the  same  can  be  found.  If  the  charter  con- 
tains the  names  of  the  directors  for  the  first  year,  as  is  some- 
times required  by  statute,  it  is  also  well  to  have  a  formal  recog- 
nition of  the  appointment  of  such  directors  spread  upon  the 
minutes. 

§  102.     Transfer  of  Subscriptions. 

If  any  of  the  subscriptions  have  been  transferred,  such 
transfer  should  be  brought  to  the  attention  of  the  meeting  by 
the  secretary,  and  action  taken  recognizing  such  transfers. 

§  103.     Adoption  of  By-Laws. 

The  next  business  in  order  is  usually  the  adoption  of  by-laws. 
As  a  general  rule  the  stockholders  are  the  ones  who  make  and 
change  the  by-laws.2  Sometimes  that  power  is  vested  by  the 
statute  in  either  the  directors  or  the  stockholders,  and  some- 
times in  the  directors  alone.3  It  is  also  quite  a  common  prac- 
tice in  modern  times  to  insert  a  provision  in  the  by-laws  en- 
abling the  directors  to  amend  at  will.4  In  determining  whether 
by-laws  should  be  adopted  by  the  incorporators  or  by  the 
directors,  reference  must  be  had  to  the  statute  of  the  state  of 
incorporation. 

§  104.  Assuming  that  the  stockholders  or  incorporators 
are  the  ones  upon  whom  this  power  devolves,  the  matter  of 
by-laws  should  receive  very  careful  consideration  at  this  meet- 

1  10  Cyc.  203 ;   1  Clark  &  M.  Corp.  §  44 ;  1  Cook,  Corp.  §  2a. 

2  Supra,  §  75,  and  notes.  a  id.  *  Id. 

(no) 


Ch.  5)  FIRST    MEETING   OF    INCORPORATORS.  §  105a 

ing.  It  is  customary  to  read  and  act  upon  the  proposed 
draft,  section  by  section,  so  that  full  deliberation  may  be  had 
in  determining  whether  or  not  to  adopt  them.  The  matter 
of  by-laws  will  be  discussed  at  greater  length  in  the  following 
chapter.5 

§  105.     Election  of  Directors. 

The  election  of  directors  is  then  usually  proceeded  with.  If 
the  directors  for  the  first  year  are  named  in  the  charter  in 
accordance  with  a  statute,  then  of  course  such  election  would 
l)e  superfluous.  Otherwise  they  should  be  chosen  at  this  meet- 
ing. If  the  legislature  has  prescribed  no  particular  form 
in  which  the  election  should  be  conducted,  it  may  be  man- 
aged in  the  customary  way.  That  is  to  say,  some  one  nom- 
inates a  board,  and  upon  the  nomination  being  seconded  the 
vote  is  taken,  the  majority  vote  deciding.  In  practice  there  is 
generally  no  contest  at  this  first  meeting,  inasmuch  as  the  di- 
rectors have  usually  been  determined  upon  beforehand.  Where 
the  statute  requires  the  election  to  be  by  ballot  it  is  customary 
to  instruct  the  secretary  of  the  meeting  to  cast  the  ballot  for 
the  persons  nominated,  a  procedure  which  may  be  had  by  unani- 
mous consent.6 

§  105a.     Inspectors  of  Election. 

Where  the  election  is  contested,  and  inspectors  are  appointed 
to  receive  and  count  the  ballots,  the  manner  of  proceeding  is 
somewhat  more  complicated,  and  some  rather  interesting  ques- 
tions of  law  may  arise.  In  the  absence  of  some  custom  or 
law  to  the  contrary,  the  inspectors  are  elected  by  those  present 
at  the  meeting.7  There  is  no  law  requiring  an  inspector  to  be 
a  stockholder.  Indeed,  it  has  been  said  that  it  is  better  to 
.select  an  outside  person  for  this  office.8  For  manifest  reasons 

s  Infra,  c.  VI. 

e  Christ  Church  v.  Pope,  8  Gray  (Mass.)  140 ;  2  Cook,  Corp.  §  605. 
7  2  Cook,  §  605 ;    State  v.  Merchant,  37  Ohio  St.  251. 
*  Dickson  v.  McMurray,  28  Grant,  Ch.  (Can.)  533 ;    People  v.  Rail- 

(91) 


§  106  BUSINESS   CORPORATIONS.  (Cll.  5 

it  is  better  that  the  inspectors  should  not  themselves  be  can- 
didates, although  it  has  been  held  in  New  York  that  this  will 
not  disqualify  them.8  Some  statutes,  recognizing  the  evil  of 
inspectors  being  candidates,  forbid  this,  although  sometimes 
exceptions  are  made  in  favor  of  the  first  meeting.10 

§  106.     Swearing  Inspectors. 

It  is  frequently  required  by  statute  that  the  inspectors  shall 
be  sworn  before  entering  upon  the  duties  of  their  office.  The 
following  form  of  oath  complies  with  the  usual  requirements : 

§  107.     Inspectors'  Oath. 
State  of ..) 

v.  QQ    • 

County  of j 

The  undersigned,  duly  appointed  to  act  as  inspectors  of  election  at 
the  initial  meeting  of  the  incorporators  and  subscribers  to  the  capital 

stock  of  the Company,  a  corporation  created  under  the 

laws  of  the  state  of ,  held  at ,  in  the  city 

of   ,  on  the   day  of   A.   D. 

19..,  being  severally  duly  sworn  upon  their  respective  oaths,  do 
undertake,  promise,  swear,  and  say,  and  each  for  himself  does  under- 
take, promise,  swear,  and  say,  that  they  and  he  will  faithfully,  hon- 
estly, and  impartially  perform  the  duties  of  inspectors  and  inspector 
of  election  for  directors  of  said  company  to  be  held  on  said  date,  to> 
the  best  of  their  and  his  ability,  and  make  a  true  report  of  the  re- 
sults of  said  election.  


Severally  subscribed  and  sworn  to  before  me  this dny 

of ,  A.  D.  19... 

[Notarial  Seal.]  Notary  Public. 

§  103.     Counting  Ballots. 

After  qualifying,  the  inspectors  take  charge  of  the  election, 
receiving  the  ballots  and  counting  them.     Their  powers  are 

road  Co.,  55  Barb.  (N.  Y.)  344.  See,  also,  Stebbins  v.  Merritt,  10 
Cush.  (Mass.)  27. 

»  Ex  parte  Willcocks,  7  Cow.  402,  17  Am.  Dec.  525. 

10  Civ.  Code  Porto  Rico,  tit.  2,  c.  1,  §  48;  Gen.  Corp.  Law  N.  J.  §  35.. 
(92) 


Ch.  5)  FIRST    MEETING    OF    INCORPORATORS.  §  110 

merely  ministerial.  If  a  vote  is  challenged  the  only  evidence 
they  may  receive  upon  the  question  of  the  right  of  the  party 
offering  the  vote  to  cast  it  are  the  books  of  the  company,  the 
stock  transfer  books  controlling.11 

§  lOSa.     Powers  of  Inspectors. 

Inspectors  of  election  have  no  power  to  pass  upon  the 
validity  of  proxies  apparently  regular  upon  their  face.12  They 
have  no  right  to  require  a  proxy  to  be  acknowledged  or  proven 
by  a  subscribing  witness,  unless  the  statute  or  by-laws  require 
it,13  nor  can  the  inspectors  pass  upon  the  qualifications  of  a 
candidate  for  election ;  and  votes  cast  for  an  ineligible  can- 
didate will  not  be  discarded  so  as  to  result  in  the  election  of  one 
having  a  minority  of  the  votes,  unless  it  is  made  to  appear  that 
those  voting  knew  of  the  ineligibility  of  the  candidate  for 
whom  they  voted.1*  But  the  stockholders  should  be  careful  not 
to  nominate  candidates  who  would  be  ineligible;  and  in  con- 
sidering this  they  should  ascertain  whether  candidates  pro- 
posed have  the  requisite  capacity  with  regard  to  residence,  stock 
ownership,  etc.,  to  hold  the  office  for  which  they  are  nominated ; 
otherwise  the  courts  may  declare  the  election  invalid. 

§  109.     Inspectors'  Report. 

After  the  votes  have  been  counted  and  the  result  ascertained 
the  inspectors  make  their  report  to  the  meeting,  which  may 
be  in  the  following  form: 

§  110.     Form  of  Inspectors'  Certificate. 

The  undersigned,  the  inspectors  duly  appointed  to  conduct  the 
election  for  directors  of  the  Company,  a  corporation 

1 1  In  re  Election  of  St.  Lawrence  Steamboat  Co.,  44  N.  J.  Law. 
529;    Downing  v.  Potts,  23  N.  J.  Law,  66;    People  v.  Kip,  4  Cow. 
(N.  Y.)  382,  note. 

12  in  re  Cecil,  36  How.  Prac.   (N.  Y.)  477;    In  re  Election  of  St. 
Lawrence  Steamboat  Co.,  supra. 

is  id. 

n  In  re  Election  of  St.  Lawrence  Steamboat  Co.,  44  N.  J.  Law,  529. 

(93) 


§  111  BUSINESS    CORPORATIONS.  (Ch.  5 

created  under  the  laws  of  the  state  of  ,  do  hereby  cer- 
tify and  report  that  at  a  meeting  of  the  incorporators  and  subscribers 

to  the  capital  stock  of  said  company  held  at ,  in  the  city 

of ,  on  the day  of ,  A.  D.  19 . .  ^ 

at  the  hour  of o'clock  in  the  . . .  .noon,  a  quorum  being 

present,  after  the  undersigned  had  been  first  duly  sworn  by  the  form 
of  oath  filed  herewith  to  impartially  conduct  said  election,  we  did 
hold  and  conduct  the  election  aforesaid,  and  did  receive  the  ballots 
of  the  persons  entitled  to  vote  thereat;  that  the  total  number  of 

votes  cast  was  ;    and  that  the  result  of  the  vote  taken 

thereat  was  the  election  by  the  vote  set  opposite  their  respective 
names  herein  of  the  following  directors  to  serve  for  the  ensuing  year: 

Name.  Votes  Received. 

John   Doe 

Richard   Roe 

William   Blackstone 

etc.  etc. 

In  testimony  whereof  we  have  hereunto  set  our  names  and  affixed 

our  seals  this day  of ,  A.  D.  19. .. 

,  [Seal.] 

[Seal.] 

Inspectors. 

§  111.     Notary's  Certificate. 

If  it  is  desired  to  have  the  report  authenticated,  the  following: 
form  of  notary's  certificate  is  sometimes  used : 

§  Ilia.     Form  of  Notary's  Certificate. 
State  of ) 

*  QQ    ' 

County  of j 

On  the  day  of  A.  D.  19..,  before  me 

personally  came  (fill  in  names  of  inspectors),  to  me  known  to  be  the 
persons  who  executed  the  foregoing  certificate,  and  severally  acknowl- 
edged that  they  executed  the  same  for  the  purposes  therein  set  forth. 


[Notarial  Seal.]  Notary  Public. 

§  112.     Filing  Certificate. 

In  the  state  of  New  York  both  the  inspectors'  oath  and  cer- 
tificate must  be  afterwards  filed  in  the  office  of  the  clerk  of 
(94) 


Ch.  5)  FIRST   MEETING   OF    INCORPORATORS.  §  115 

the  county  in  which  the  election  is  held.15  Wherever  this  is  not 
required,  these  documents  should  be  retained  by  the  secretary 
of  the  company  for  use  whenever  desired. 

§  113.     Election  of  Officers. 

The  subordinate  officers  of  the  corporation  are  generally 
elected  by  the  directors.16  But  occasionally  provision  is  made 
for  the  election  of  these  officers  or  some  of  them  by  the  stock- 
holders. It  is  not  at  all  infrequent  to  have  the  stockholders 
elect  the  president  of  the  corporation.  In  case  such  election 
is  to  be  conducted  at  a  stockholders'  meeting,  in  regular  order, 
it  would  now  take  place,  being  managed  in  much  the  same  way 
as  the  election  of  directors  was  held. 

§  114.     Authority   to   Directors   to   Assess    Stock. 

When  the  understanding  is  that  stock  is  to  be  paid  for  in 
installments,  it  is  usual  at  the  first  meeting  of  incorporators  to 
give  to  the  board  of  directors  power  to  assess  the  stock  up  to 
the  full  amount,  payable  as  and  when  called  for  by  the  board. 

§  115.     Payment  for  Stock. 

With  reference  to  this  feature,  a  distinction  must  be  drawn 
among  the  various  laws  of  the  different  states.  Where  pay- 
ment for  stock  is  required  to  be  in  cash,  the  statutory  require- 
ment must  be  followed.  Of  course,  it  would  be  competent  for 
the  corporation,  at  the  same  time  that  the  cash  is  paid,  to  pay 
it  back  again  to  the  subscriber  for  services  or  property.  But 
it  must  appear  upon  the  books  as  a  cash  transaction,  and  the 
whole  proceeding  must  be  bona  fide. 

IB  Gen.  Corp.  Law  N.  Y.  §  26. 

IB  Batchelor  v.  Bank,  78  Ky.  435 :  Granger  v.  Brewing  Co.,  25  Misc_ 
Rep.  302,  54  N.  Y.  Supp.  590 ;  Dill,  N.  J.  Corp.  p.  5. 

(95) 


§  115a  BUSINESS   CORPORATIONS.  (Cll.  5 

§  lloa.     Exchange  of  Stock  for  Property. 

As  we  have  heretofore  seen,17  sometimes  payment  may  be 
made  in  property,  and  sometimes  either  in  property  or  services. 
The  legislatures  in  many  states  have  enacted  that  the  judg- 
ment of  the  board  of  directors  as  to  the  value  of  such  proper- 
ty or  services  is,  in  the  absence  of  fraud,  final  and  conclusive. 
In  other  states  there  is  no  statutory  provision  on  the  sub- 
ject. But  without  such  it  is  now  well  settled  that,  in  order  to 
make  void  stock  which  is  issued  for  property  taken  at  an 
overvaluation,  it  must  be  shown,  not  only  that  there  was  an 
overvaluation,  but  also  that  such  overvaluation  was  intentional 
and  fraudulent.18  But  the  state  might  bring  an  action  to  de- 
clare a  forfeiture  of  the  corporate  franchise  in  a  flagrant  case.10 
Stockholders  not  assenting  to  it  may  also  bring  suit  to  annul 
and  set  aside  the  whole  transaction.20  But  the  great  weight  of 
authority  is  in  favor  of  the  proposition  that  corporate  creditors 
cannot  hold  the  owners  of  such  stock  liable  as  for  stock  not 
fully  paid,21  though  if  the  property  which  is  turned  in  is 
practically  worthless,  or  is  unsubstantial  or  shadowy  in  its  na- 
ture, the  courts  hold  that  there  has  been  no  payment  at  all,  and 
that  the  stockholders  are  liable  upon  the  stock.22  Of  course, 

"  Chapter  I. 

is  Coit  v.  Amalgamating  Co.,  119  U.  S.  343,  7  Sup.  Ct.  231,  30  L. 
Ed.  420;  Bank  of  Fort  Madison  v.  Aldeu,  129  U.  S.  372,  9  Sup.  Ct. 
o32,  32  L.  Ed.  725;  Lloyd  v.  Preston,  14G  U.  S.  630,  13  Sup.  Ct.  131, 
36  L.  Ed.  1111. 

i»  State  v.  Redemption  Co.,  51  La.  Ann.  1827,  26  South.  586;  State 
ex  inf.  Attorney  General  v.  Hogan,  163  Mo.  43,  63  S.  W.  378. 

20  Insurance  Press  v.  Wire  Co.,  70  App.  Div.  50,  74  N.  Y.   Supp. 
1093;    Langan  v.  Francklyn,  29  Abb.  N.  C.  102,  20  N.  Y.  Supp.  404; 
Alabama  Foundry   &   Machine   Works   v.    Dallas,   127  Ala.   513,   20 
South.  459;    Dean  v.  Baldwin,  99  111.  App.  r,si>. 

21  Coit  v.  Amalgamating  Co.,  119  U.  S.  343,  7  Sup.  Ct.  231,  30  L.  Ed. 
420;   Bank  of  Fort  Madison  v.  Alden,  129  I".  S.  372,  9  Sup.  Ct.  332.  32 
L.  Ed.  725;    Fogg  v.  Blair,  139  U.  S.  118,  11  Sup.  Ct.  470,  35  L.  Ed. 
104. 

22  Camden  v.  Stuart,  144  U.  S.  104,  12  Sup.  Ct  585,  3G  L.  Ed.  363. 
For  an  elaborate  discussion  of  this  whole  matter,  see  1  Cook,  Corp. 
§§  35-47. 

(96) 


Ch.  5)  FIRST    MEETING    OF    INCORPORATORS.  §  116a 

the  principles  above  announced  are  subject  at  any  time  to 
change  by  statutory  provisions. 

§  116.     Donating  Stock  Back  to  Treasury. 

Frequently  a  corporation  will  be  formed  merely  for  the 
purpose  of  taking  over  an  existing  business  owned  by  another 
corporation  or  by  an  individual  or  set  of  individuals,  or  such 
property  may  be  received  in  payment  for  a  part  of  the  stock 
issued  by  the  new  corporation.  As  it  is  found  that  stock  can 
be  more  readily  sold  at  less  than  par  than  at  par,  a  favorite  de- 
vice is  to  have  property  turned  in  at  a  fixed  valuation,  and 
stock  issued  in  payment  therefor,  the  vendor  of  the  property 
then  donating  back  to  the  treasury  of  the  company,  to  be  held 
by  it  as  treasury  stock,  and  issued  under  the  direction  of  its 
board  of  directors,  a  certain  amount  of  the  stock  which  had 
been  issued  to  him,  and  which  may  thereafter  be  sold  by  the 
corporation  at  less  than  par  and  still  retain  its  character  of  full- 
paid  stock.  The  legality  of  this  has  been  upheld  in  the  ab- 
sence of  a  statute  forbidding  it.88 

§  116a.     Accepting   Proposition. 

The  practice,  therefore,  is  at  the  first  meeting  of  incorpo- 
rators  to  present  a  formal  proposition  from  the  owner  of  such 
property,  offering  the  same  to  the  corporation  at  a  figure 
named,  to  be  paid  for  in  full-paid  and  nonassessable  stock,  and 
stating  that  in  the  event  of  the  acceptance  of  the  proposition 
a  certain  proportion  of  the  stock  to  be  issued  will  be  donated 
back  to  the  company,  to  be  disposed  of  as  it  sees  fit.  The  in- 
corporators  then  pass  a  resolution  reciting  that  such  property 
is  necessary  to  the  conduct  of  the  business  of  the  company, 
and  that  the  same  is  of  the  value  named,  and  authorizing  the 
directors,  in  their  discretion,  to  make  the  purchase  under 
the  terms  of  the  proposition,  and  issue  stock  in  payment  to 
the  vendor  and  his  nominees.  It  is  quite  customary  also  to 

2*1  Cook,  Corp.  bott.  p.  133.  and  cases  cited. 

CLEPII. Bus. CORP. — 7  (97) 


§  116b  BUSINESS    CORPORATIONS.  (Ch.  5 

have  the  original  proposition  recite  an  agreement  between 
the  proposer  and  the  incorporators  by  which  the  stock  to  be 
issued  to  him  or  to  his  order  is  to  include  the  incorporators' 
stock.  Care  should  be  taken,  however,  not  to  issue  all  of 
the  stock  to  one  person  or  corporation,  because  there  should 
always  be  a  sufficient  number  of  persons  stockholders  in  the 
corporation  to  preserve  its  corporate  existence  under  the  laws. 

§  116b.     Trustees  to  Hold   Treasury  Stock. 

Should  it  be  deemed  necessary,  in  order  to  keep  this  treas- 
ury stock  separate  and  apart  from  the  unissued  stock  of  the 
company,  to  place  it  in  the  names  of  trustees  to  hold  subject 
to  orders  of  the  board  of  directors,  the  resolution  above  re- 
ferred to  should  include  the  appointment  of  trustees  to  re- 
ceive and  hold  the  stock,  and  a  statement  of  the  terms  upon 
which  it  is  to  be  held  by  them. 

§  117.     Authority  to  Issue  Stock  to   Incorporators. 

If  the  proposition  above  adverted  to  does  not  include  the 
incorporators'  stock,  then  authority  is  generally  specifically 
conferred  upon  the  board  by  the  stockholders  to  issue  the 
shares  subscribed  for  by  the  incorporators  when  the  same 
shall  have  been  fully  paid. 

§  118.     Authority  to  Issue  Stock  to   Charter  Limit. 

In  order  that  the  directors  may  proceed  at  once  with  the 
project  in  hand,  authority  may  be  given  them  at  this  first 
meeting  to  issue,  at  their  discretion,  such  stock  as  may  be  nec- 
essary, beyond  the  amount  named  in  the  charter  as  that  with 
which  the  company  is  to  commence  business,  up  to  the  full 
amount  permitted. 

§  119.     Authority  to  Establish  Office,  Etc. 

The  state  legislatures  have  generally  enacted  laws  requiring 
each  corporation  to  open  and  maintain  an  office  in  the  parent 
(98) 


Ch.  5)  FIRST    MEETING    OF    INCORPORATORS.  §  122 

state,  where  the  company's  sign  shall  be  displayed,  certain  cor- 
porate books  kept,  and  an  agent  stationed,  authorized  to  ac- 
cept service  on  behalf  of  the  corporation  in  any  suits  which 
may  be  filed  against  it.  Sometimes  statutes  require  the  reso- 
lution authorizing  this  to  be  passed  by  the  stockholders,  and 
sometimes  by  the  board  of  directors.  It  is  an  important 
matter,  and  should  not  be  overlooked.  A  certified  copy  of 
this  resolution  should  usually  be  filed  with  the  proper  official 
of  the  parent  state. 

§  120.     Corporate  Seal. 

This  should  preferably  be  approved  by  the  stockholders  at 
this  meeting. 

§  121.     Form  of  Stock  Certificate. 

It  is  also  well  to  have  the  stockholders  agree  upon  the 
form  of  stock  certificate,  although  this  might  be  done  by  the 
board  of  directors. 

§  122.     Issue  of  Preferred  Stock. 

The  charter  may  not  have  provided  for  the  issue  of  preferred 
stock,  although  it  may  be  deemed  expedient  to  create  stock 
of  this  species.  This  is  the  occasion,  therefore,  when  such 
issue  should  be  authorized.  Even  though  the  statute  is  silent 
on  the  subject,  it  is  perfectly  legal  for  the  stockholders  at  this 
first  meeting  to  pass  a  resolution  authorizing  this  class  of 
stock.24  It  is  important  that  it  should  be  done  at  this  first 
meeting,  however,  for  if  any  common  stock  is  issued  preferred 
stock  cannot  afterwards  be  issued  without  the  unanimous  con- 
sent of  all  the  stockholders,  unless  the  statute  permits  it.25 
The  resolution  providing  for  this  class  of  stock  should  state 

2*  1  Cook,  Corp.  §  208,  and  notes;  2  Clark  &  M.  Corp.  §  415. 
"Id. 

(09) 


§  123  BUSINESS   CORPORATIONS.  (Cll.  5 

very  clearly  the  nature  of  the  preferences,  as  to  which  more 
will  be  said  in  another  chapter.26 

§  123.     Salaries  to  Officers. 

Although  the  question  of  salaries  is  usually  committed  to  the 
board  of  directors  for  determination,  it  is  a  settled  principle 
that  the  directors  have  no  power  to  vote  to  themselves  salaries 
as  such.27  If,  therefore,  these  officers  are  to  receive  compensa- 
tion in  that  capacity,  the  stockholders  should  vote  it  to  them. 

§  123a.     Directors  as  Officers. 

Corporations  have  frequently  become  involved  in  litigation 
because  the  directors,  although  not  voting  salaries  to  them- 
selves as  directors,  have  conferred  upon  themselves  as  officers 
a  rate  of  compensation  which  was  thought  by  some  of  the 
stockholders  to  be  excessive  and  to  smack  of  fraud.  Because 
of  this  the  managers  of  many  corporations  have  found  it  a 
wise  precaution  to  have  a  resolution  passed  at  the  stockhold- 
ers' meeting  fixing  the  salaries  of  the  officers,  where  the  di- 
rectors are  themselves  to  be  such  officers.  It  would  be  more 
difficult  after  such  a  resolution  to  claim  with  much  prospect 
of  success  that  the  directors  had  acted  fraudulently  in  this 
connection.28 

§  124.     Miscellaneous  Matters. 

Such  other  miscellaneous  matters  of  business  as  may  prop- 
erly come  before  the  meeting  may  also  be  transacted. 

§  125.     Adjournment. 

The  meeting  should  then  formally  adjourn,  either  sine  die 
or  to  a  day  certain. 

26  Infra,  c.  VIII. 

27  Fitzgerald  &  Mallory  Const  Co.  v.  Fitzgerald,  137  U.  S.  98,  11 
Sup.  Ct  36,  34  L.  Ed.  608. 

as  Davis  v.  Thomas  &  Davis  Co.,  63  N.  J.  Eq.  572,  52  Atl.  717. 
(100) 


Ch.  5)  FIRST    MEETING    OF    IXCORPORATORS.  §  126a 

§  126.     Minutes. 

It  has  become  quite  general  to  write  up  the  minutes  of 
this  first  meeting  in  advance,  for  the  reason  that  there  are  al- 
ways certain  formal  matters  to  be  passed  upon  which  are 
as  a  rule  entirely  understood  and  agreed  upon  before  the 
meeting  is  called.  By  so  doing  nothing  is  apt  to  be  forgotten. 
The  proper  record  of  the  proceedings  of  every  corporation  is 
of  the  utmost  importance,  for  the  business  done  is  apt  to  slip 
from  the  memories  of  those  in  attendance,  and  the  minutes 
are  the  only  means  by  which  a  permanent  record  may  be 
kept.  They  are  competent  evidence,  in  suits  between  stock- 
holders, to  show  the  acts  of  the  corporation.29  They  should 
be  clear  and  explicit.  There  is  no  necessity  for  them  to  recite 
any  of  the  arguments  in  favor  of  or  against  a  certain  proposi- 
tion. All  that  is  required  is  that  the  action  finally  taken  should 
appear,  although,  when  it  is  believed  that  the  exact  position 
of  any  stockholder  on  a  certain  question  may  thereafter 
be  disputed,  it  is  sometimes  found  expedient  to  incorporate 
in  the  minutes  an  epitome  of  his  remarks  upon  this  question. 
Then,  too,  it  is  better,  if  a  stockholder  taking  part  in  a  dis- 
cussion desires  that  a  memorandum  of  his  views  should  be 
spread  upon  the  minutes,  that  his  wishes  in  this  respect  be 
complied  with.  In  certain  cases  this  may  be  demanded  as  a 
matter  of  right.30 

§  126a.     How  Kept. 

The  minutes  should  be  kept  in  a  book  firmly  bound.  As 
a  matter  of  convenience  it  is  well  to  copy  the  charter  in  full 

2»Abernethy  v.  Society,  3  Daly  (N.  Y.)  1;  Booth  v.  Fire  Engine 
Co.,  118  Ala.  369,  24  South.  405 ;  Harrison  v.  Morton,  83  Md.  456,  35 
Atl.  99;  White  Chimney  &  S.  C.  Turnpike  Road  Co.  v.  McMahnn 
(Ky.)  50  S.  W.  836 ;  Heintzelman  v.  Association,  38  Minn.  138,  36  N. 
W.  100;  Dennis  v.  Manufacturing  Co.,  19  R.  I.  666,  36  Atl.  129,  61 
Am.  St.  Rep.  805;  Smith  v.  Steamboat  Co.,  1  How.  (Miss.)  479; 
Bracket*  v.  Persons  Unknown,  53  Me.  228,  87  Am.  Dec.  548. 

so  Gen.  Corp.  Law  N.  J.  §  30. 

(101) 


§  126b  BUSINESS  CORPORATIONS.  (Ch.  5 

on  the  first  page  of  the  minute  book,  followed  by  the  by- 
laws, sufficient  space  being  then  left  in  the  book  to  subsequently 
insert  any  amendments  to  the  by-laws  which  may  afterwards  be 
adopted.  Then  should  follow  the  minutes  of  the  first  meet- 
ing of  the  incorporators  and  subscribers  to  the  stock,  to  which 
should  be  appended  copies  of  such  papers  as  may  be  ordered 
spread  upon  the  record. 

§  126b.     Signature. 

When  completed  the  minutes  should,  of  course,  be  signed  by 
the  secretary.  Sometimes  it  is  considered  better  to  have 
the  president  sign  also,  as  an  additional  guaranty  of  their  ac- 
curacy. 

§  127.     Form  of  Minutes  of  First  Meeting  of  Incorporators 
and  Subscribers. 

(To  be  varied  to  suit  the  circumstances  of  each  case.) 

The  first  meeting  of  the  incorporators  and  subscribers  to  the  capi- 
tal stock  of  the Company  was  held  at ,  in 

the  city  of on  the day  of ,  A. 

D.  19..,  at  the  hour  of  o'clock  in  the  ....noon,  pur- 
suant to  notice  (or  pursuant  to  the  waivers  appended  hereto). 

The  meeting  was  called  to  order  by  Mr ,  who  asked 

for  nominations  for  the  office  of  chairman.  Mr was 

duly  nominated  and  unanimously  elected  to  this  office.  He  having 
assumed  the  chair,  nominations  for  secretary  were  called  for,  pur- 
suant to  which  Mr was  nominated  and  unanimously 

elected  to  that  position,  and  assumed  the  duties  thereof. 

The  roll  was  then  called,  showing  the  following  attendance: 

In  Person. 

Name Number  of  Shares 

Name do. 

etc.  etc. 

By  Pro.ry. 

Name Name  of  Proxy Number  of  Shares 

Name Name  of  Proxy do. 

etc.  etc.  etc. 

(102) 


Ch.  5)  FIRST   MEETING   OP    INCORPORATORS.  §  127 

The  call  (or  waiver  of  notice)  upon  which  the  meeting  was  con- 
vened was  then  read  and  ordered  spread  upon  the  minutes,  and  is 
as  follows: 

(Insert  call  or  waiver,  as  the  case  may  be.) 

A  waiver  of  notice  of  assessment  was  also  read,  signed  by  the  per- 
sons whose  names  appear  in  these  minutes  appended  thereto,  and 
ordered  spread  upon  the  minutes,  and  is  in  the  words  and  figures 
following: 

(Insert  waiver.) 

Mr reported  that  the  certificate  of  incorporation  of 

the  company  had  been  filed  in  the  office  of  (insert  office  of  the  proper 
state  official  where  the  certificate  was  filed),  and  had  been  there  duly 

recorded  in  liber  number at  page  number 

et  seq.,  and  presented  a  copy  of  the  same,  which  was  ordered  spread 
upon  the  minutes. 

(Note. — If  the  charter  has  been  granted  by  a  special  act  of  the 
legislature,  instead  of  the  above  entry  a  resolution  should  appear 
formally  accepting  such  charter.) 

Upon  motion  of  Mr ,  the  directors  named  in  said  cer- 
tificate were  recognized  as  the  directors  of  the  company  for  the  first 
year  of  its  existence. 

(Note. — In  those  states  where  the  certificate  of  incorporation  does 
not  contain  the  names  of  the  directors  the  above  paragraph  will,  of 
course,  be  eliminated.  In  that  event  the  paragraphs  hereinafter  in- 
serted relating  to  the  election  of  directors  would  appear  at  the  place 
where  the  same  appear  in  this  form  of  minutes.) 

Upon  motion  of  Mr ,  the  following  transfers  of  sub- 
scription were  presented  and  recognized  on  behalf  of  the  company: 

Name  of  Original  Subscriber.  Name  of  Transferee.  No.  of  Shares. 
John  Doe.                            Richard  Roe.  10 

etc.  etc.  etc. 

etc.  etc.  etc. 

The  secretary  announced  that  a  set  of  proposed  by-laws  had  been 
drafted  by  counsel  and  was  ready  for  consideration  by  the  meeting; 
whereupon  the  same  were  read,  section  by  section,  and,  after  full 
discussion,  the  following  by-laws  were  unanimously  adopted  to  gov- 
ern the  affairs  of  the  company: 

(Insert  the  by-laws  adopted,  or  make  a  note  in  the  minutes  refer- 
ring to  the  page  of  the  minute  book  where  the  by-laws  can  be  found. 
Complete  forms  of  by-laws  will  be  found  in  §§  13&-137  of  this  book.) 

The  election  of  directors  being  next  in  order,  the  following  gen- 
tlemen were  elected  (or  appointed)  inspectors  of  election,  to  wit: 

Messrs and The  oath  of  office  was  then 

(103) 


§  127  BUSINESS    CORPORATIONS.  (Ch.  5 

administered  to  them,  a  copy  of  which  is  appended  to  these  min- 
utes. 

(It  is  not  always  necessary  that  the  inspectors  of  election  should 
be  appointed.  Consult  the  statutes  with  regard  to  this.) 

The  following  persons  were  nominated  by  Mr as 

directors  to  hold  office  for  the  first  year  of  the  company's  existence, 
to  wit:  (Insert  names  of  nominees.)  No  other  nominations  being 
made,  the  nominations  were  ordered  closed.  The  polls  were  then 
opened,  and  remained  open  until  all  those  desiring  to  vote  had  cast 
their  ballots,  after  which  the  polls  were  declared  closed,  and  the 
ballots  were  counted.  The  inspectors  then  presented  their  report,  a 
copy  of  which  is  appended  to  these  minutes.  In  accordance  there- 
with the  following  gentlemen  were  declared  duly  elected  directors  of 
the  company  for  the  first  year  of  its.  existence,  to  wit:  (Insert  the 
names  of  directors  elected.) 

(Note. — All  reference  to  the  election  of  directors  will  be  omitted 
where  they  are  designated  for  the  first  year  in  the  charter.  In  this 
event  the  paragraph  appearing  above,  showing  the  recognition  by  the 
stockholders  of  the  directors  named  in  the  charter,  will  be  proper.) 

Mr nominated  the  following  officers  to  serve  for  the 

first  year  of  the  company's  existence,  to  wit:  (Insert  names  of  nom- 
inees and  the  respective  offices  to  which  they  were  nominated.)  No 
other  nominations  being  made,  the  secretary  was  unanimously  in- 
structed to  cast  the  ballot  of  the  meeting  for  the  gentlemen  named, 
and  they  were  declared  duly  elected  to  fill  the  said  offices  for  the 
first  year  of  the  company's  existence. 

(Note. — Where  the  directors  elect  the  olEcers,  of  course  this  item 
will  not  appear  in  the  minutes  of  this  meeting.) 

On  motion  of  Mr the  board  of  directors  was  author- 
ized to  assess  the  stock  subscribed  for  up  to  the  limit  of  the  par 
value  thereof,  payable  when  and  as  called  for  by  said  board. 

The  secretary  then  read  a  proposition  tendered  by  Mr , 

offering  to  sell  to  the  company  certain  property  therein  described  in 
exchange  for  one  hundred  thousand  dollars  of  the  capital  stock  of 
this  company,  to  be  issued  to  himself  or  his  assigns,  full  paid  and 
nonassessable,  to  include  the  stock  subscribed  for  by  the  incorpora- 
tors,  .offering  also  to  donate  to  the  treasury  of  the  company  twenty- 
five  thousand  dollars  of  such  stock  at  par  if  the  proposition  should 
be  accepted  and  the  stock  issued  to  him  in  accordance  therewith. 

After  due  consideration,  the  following  preamble  and  resolutions 
were  adopted  upon  motion  of  Mr : 

Whereas,  a  proposition  has  been  received  from  Mr 

offering  to  sell,  transfer,  and  assign  to  this  company  the  following 
004) 


Ch.  5)  FIRST   MEETING    OF    INCORPORATORS.  §  127 

described  property,  to  wit  (insert  description) ;  said  property  to  be 
paid  for  by  full-paid  and  nonassessable  stock  of  this  company  of  the 
par  value  of  one  hundred  thousand  dollars,  to  be  issued  to  Mr. 

or  his  assigns ;   offering  also,  in  case  of  the  acceptance 

of  said  proposition,  to  donate  to  the  treasury  of  the  company  twenty- 
five  thousand  dollars  of  the  stock  to  be  issued  in  payment  as  afore- 
said at  par ;  and 

Whereas,  in  the  judgment  of  the  stockholders  and  persons  entitled 
to  stock  in  this  company,  said  proposition  is  fair  and  reasonable,  and 
the  value  of  the  property  offered  is  equal  to  that  of  the  stock  pro- 
posed to  be  issued  in  payment  therefor,  and  such  property  is  neces- 
sary to  enable  the  company  to  properly  conduct  its  affairs : 

Therefore  be  it  resolved  that  the  board  of  directors  be  and  they 
are  hereby  authorized  and  requested,  if  in  their  judgment  it  is  proper 
so  to  do,  to  accept  said  proposition  and  purchase  the  property  above 
mentioned  upon  the  terms  thereof,  and  to  issue  stock  in  payment  in 
accordance  therewith ; 

And  be  it  further  resolved  that,  in  accordance  with  an  agreement 
entered  into  between  the  individual  iucorporators  of  this  company 
and  the  proposed  vendor  of  said  property,  the  stock  to  be  issued  in 
payment  as  aforesaid  shall  include  the  stock  subscribed  for  by  said 
incorporators,  and  said  incorporators  be  released  from  all  further 
obligation  under  their  said  subscriptions. 

And  be  it  further  resolved  that and be 

and  they  are  hereby  appointed  trustees  to  receive  and  hold  the 
twenty-five  thousand  dollars  of  stock  to  be  donated  to  this  company 
under  the  terms  of  said  proposition,  in  accordance  with  the  instruc- 
tions which  shall  from  time  to  time  be  given  them  by  the  board  of 
directors. 

On  motion  of  Mr ,  the  directors  were  authorized  to 

issue  stock  to  the  subscribers  therefor  upon  receiving  payment  in  full. 

(Note. — This  last  item  will  not  appear  if  the  resolution  inserted 
above  is  passed  providing  for  the-  inclusion  of  the  incorporators' 
shares  in  the  stock  to  be  issued  to  the  vendor  of  the  property  therein 
referred  to.) 

Upon  motion  of  Mr ,   it  was  unanimously  resolved 

that  the  board  of  directors  be  and  they  are  hereby  authorized  from 
time  to  time,  in  their  discretion,  to  issue  capital  stock  of  this  com- 
pany up  to  the  full  amount  allowed  by  its  charter,  in  such  amounts 
as  shall  be  lawfully  fixed  by  said  board,  and  to  accept  in  full  or  in 
partial  payment  for  said  stock  either  cash  or  such  property  as  the 
board  may  from  time  to  time  determine  to  be  necessary  to  properly 
carry  on  the  business  of  this  company. 

(105) 


§  127  BUSINESS   CORPORATIONS.  (Ch.  5 

Upon  motion  of  Mr the  following  resolution  was 

unanimously  adopted: 

Ordered:  (1)  That  in  compliance  with  the  laws  of  the  state  of 
(insert  name  of  parent  state)  the  registered  office  of  the  company  in 
said  state  be  established  and  continuously  maintained  at  (fill  in 
street  and  number). 

(2)  That be  and  is  hereby  appointed  the  agent  of  this 

company  in  charge  of  said  office,  upon   whom  process  against  this 
corporation  may  be  served,  with  instructions  and  authority  to  keep 
in  said  office  the  stock  transfer  books,  to  register  transfers  therein, 
and  to  keep  all  other  books  and  records  of  this  company  by  law  re- 
quired to  be  kept  therein,  during  the  usual  hours  of  business,  open 
to  examination  by  every  stockholder  and  other  person   entitled  to 
inspect  the  same. 

(3)  That  the  name  of  this  corporation  shall  be  at  all  times  con- 
spicuously displayed  on  a  sign  at  the  entrance  to  said  office. 

(4)  That  any  stockholder  of  the  company  shall  be  entitled  to  a  list 
of  the  names  and  addresses  of  the  stockholders,  with  a  statement 
of  the  number  of  shares  held  by  each,  upon  prepayment  to  said  agent 
of  a  reasonable  fee  to  be  fixed  by  him  for  making  same. 

The  secretary  was,  on  motion  of  Mr ,  directed  to  send 

a  copy  of  the  foregoing  resolutions,  duly  certified  by  him  under  the 
corporate  seal,  to  said  agent,  and  to  file  a  copy  thereof  with  such 
state  officials  as  the  law  may  designate. 

(Note. — In  offering  the  above  resolutions  the  statutes  of  the  parent 
state  should  be  consulted  so  as  to  make  sure  that  everything  required 
by  law  is  comprised  in  them.) 

Upon  motion  of  Mr the  design  of  corporate  seal  ap- 
pended hereto  was  adopted  as  the  corporate  seal  of  this  company. 

On  motion  of  Mr the  following  resolution  was  unani- 
mously adopted: 

Resolved,  that  the  capital  stock  of  this  company  be  divided  into 
two  classes,  to  be  known  respectively  as  common  and  preferred,  the 

common  stock  to  be  issued  to  the  par  value  of  $ ,  and  the 

preferred  stock  to  the  par  value  of  $ 

(Note. — The  proportion  of  preferred  stock  'must  never  exceed  the 
statutory  limit.) 

And  be  it  further  resolved,  that  the  holders  of  preferred  stock  shall 
be  entitled  to  receive  out  of  the  net  earnings  for  each  fiscal  year, 
as  and  when  declared  by  the  board  of  directors,  a  noncumulative 
dividend  at  the  rate  of  but  never  exceeding  6%  per  annum,  payable 
quarterly,  before  any  dividend  shall  be  set  apart  or  paid  on  the 
common  stock  for  such  year;  and  in  case  of  liquidation  or  dissolu- 
tion the  holders  of  said  stock  shall  be  paid  the  par  value  of  their 

(100) 


Ch.  5)  FIRST    MEETING    OF    INCORPORATORS.  §  127 

preferred  shares  before  any  sum  shall  be  paid  to  the  holders  of 
the  common  stock;  and  after  the  payment  of  the  par  value  of  the 
common  stock  to  the  holders  thereof,  any  surplus,  should  there  be 
such,  is  to  be  distributed  ratably  among  all  the  shareholders,  without 
preference. 

(Note.  —  The  above  resolution  will  be  varied  to  suit  the  particular 
terms  of  the  preferences  declared.) 

And  be  it  further  resolved,  that  the  forms  of  certificates  of  both 
common  and  preferred  stock  as  appended  to  this  resolution,  and 
hereby  ordered  spread  upon  the  minutes,  be  approved  and  adopted  by 
the  company. 

On  motion  of  Mr  .............  ,  the  following  resolution  was  unan- 

imously adopted: 

Resolved,  that  the  directors  of  this  company  be  and  they  are  hereby 
authorized  to  fix  the  salaries  of  the  officers  of  this  company  at  the 
following  sums,  to  wit:  (Insert  the  salaries  fixed,)  and  that  these 
salaries  may  be  paid  to  the  respective  incumbents  of  said  offices 
whether  they  are  members  of  the  board  of  directors  or  not. 

The  secretary  was  instructed  to  insert  in  the  minute  book,  for  pur- 
poses of  reference,  a  copy  of  each  of  the  following: 

(1)  Copy  of  certificate  of  incorporation  (copied  at  page  ......  ). 

(2)  Copy  of  by-laws  (copied  at  page  ......  ). 

(3)  Waiver  of  notice  of  this  meeting  (copied  at  page  ......  ). 

(4)  Waiver  of  notice  of  assessment  (copied  at  page  ......  ). 

(5)  Waiver  of  notice  of  increase  of  capital  stock  (copied  at  page 


(6)  Form  of  proxy  signed  by  the  absent  incorporators  and  subscrib- 
ers to  the  stock  (copied  at  page  ......  ). 

(7)  Transfers  of  subscription  (copied  at  page  ......  ). 

(8)  Oath  and  certificate  of  inspectors  of  election  (copied  at  page 


(9)  Corporate  seal  (impressed  upon  page  ......  ). 

(10)  Forms  of  stock  certificates  (copied  on  page  ......  ). 

There  being  no  further  business,  the  meeting,  on  motion,  adjourned. 


Secretary. 
(107) 


§  128  BUSINESS    CORPORATIONS.  (Ch.  6 

CHAPTER  VI. 

BY-LAWS. 

§  128.  Skill  in  Preparation. 

129.  By  Whom  Passed. 

130.  Object  of. 

131.  Variations  in. 

132.  Inserting  Law,  Etc. 

133.  Classification  of  Subjects. 

134.  Amendment. 

135.  Forms  of. 

136.  New  York  Corporation. 
187.            New  Jersey  Corporation. 

§  128.     Skill  in  Preparation. 

Much  of  the  success  in  the  practical  workings  of  the  com- 
pany depends  upon  the  foresight  and  skill  displayed  in  the 
preparation  of  by-laws.  The  charter,  as  before  stated,  is  the 
primary  instrument  to  which  resort  must  be  had  to  determine 
the  powers  of  a  corporation ; *  but  generally  this  merely  out- 
lines the  machinery  provided  for  its  operations.  It  is  to  the 
by-laws  that  resort  is  generally  had  for  specific  guidance  in 
these  details. 

§  129.     By  Whom  Passed. 

By-laws  are  intended  to  define  and  limit  the  power  of  di- 
rectors and  officers,  and  should  therefore  be  passed  by  the 
stockholders,  although,  as  we  have  seen,2  they  sometimes  con- 
tain within  themselves  the  power  to  directors  to  alter  or  amend 
at  their  pleasure ;  and  the  legislation  in  a  few  states  con- 
fers the  power  to  make  by-laws  primarily  upon  the  directors. 

i  Supra,  §  59.  2  Supra,  §  103. 

(108) 


Ch.  6)  BY-LAWS.  §  133 

§  130.     Object  of. 

In  preparing  this  document  counsel  generally  has  in  mind 
either  the  advancement  of  the  interests  of  the  majority  or 
the  protection  of  the  minority.  The  object  of  counsel  in  this 
particular  will  have  much  to  do  with  the  shape  of  the  instru- 
ment as  it  comes  from  his  office. 

§  131.     Variations  in. 

It  is  impossible  to  prepare  a  form  of  by-laws  which  will 
satisfactorily  govern  the  affairs  of  every  corporation.  The  en- 
vironments differ  so  widely  that  a  set  which  will  prove  most 
acceptable  to  one  corporation  may  turn  out  to  be  a  stumbling- 
block  to  another  organized  in  the  same  state,  to  accomplish 
the  same  business,  but  governed  by  a  different  class  of  men. 

§  132.     Inserting  Law,  Etc. 

Convenience  will  sometimes  dictate  that  certain  provisions  of 
the  statute  law  or  of  the  charter  should  be  inserted  in  the 
by-laws;  not  that  these  are  thereby  given  any  greater  force, 
but  that  they  are  brought  more  prominently  to  the  attention 
of  the  stockholders,  and  are  more  easily  accessible  to  them. 
Statutes  often  prescribe  certain  privileges  which  may  be  exer- 
cised if  a  statement  to  this  effect  is  incorporated  in  the  by- 
laws, or  that  certain  restrictions  shall  not  apply  if  a  provision 
to  the  contrary  is  inserted  in  this  document.  Therefore  this 
instrument  should  never  be  framed  without  an  accurate  knowl- 
edge of  the  statutes  on  the  subject. 

§  133.     Classification  of  Subjects. 

In  preparing  the  by-laws  a  definite  plan  should  be  mapped 
out  in  the  mind  of  the  draftsman.  It  will  be  found  convenient 
to  divide  them  into  eight  parts,  relating,  in  the  order  named,  to 
the  following  subjects: 

(1)  Stockholders; 

(2)  Directors; 

(3)  Executive  committee  (if  there  is  one) ; 

(109) 


§  134  BUSINESS   CORPORATIONS.  (Ch.  6 

(4)  Officers; 

(5)  Stock; 

(6)  Financial  management ; 

(7)  Miscellaneous  provisions; 

(8)  Amendments. 

§  134.     Amendment. 

By-laws  may  be  amended  from  time  to  time  in  accordance 
with  the  wishes  of  the  corporation ;  but  they  cannot  be  amend- 
ed so  as  to  impair  any  rights  which  have  become  vested  by 
virtue  of  a  previous  by-law,  even  though  the  statute  or  char- 
ter may  permit  such  amendments.8 

§  135.     Forms  of  By-Laws. 

Appended  hereto  are  two  sets  of  by-laws  at  present  in 
use,  one  by  a  New  York  corporation  well  known  in  the  manu- 
facturing and  commercial  world ;  and  one  by  the  United  States 
Steel  Corporation,  a  copy  of  whose  charter  has  already  been 
set  forth  in  these  pages.4  It  is  believed  that  these  by-laws  can 
be  easily  modified  to  suit  the  needs  of  any  corporation,  and 
they  are  inserted  verbatim,  in  preference  to  preparing  forms 
which  might  not  be  so  well  fitted  for  actual  business  needs. 

§  136.     By-Laws. 

AKTICLE  I. 
STOCKHOLDERS'   MEETINGS. 

Section  1.  All  meetings  of  the  stockholders  of  this  company  shall 
be  held  at  the  principal  office  or  place  of  business  of  the  company  in 
the  state  of  New  York. 

Sec.  2.  The  annual  meeting  of  the  stockholders  of  this  company 
shall  be  held  on  the  third  Wednesday  of  October  in  each  year,  at 
which  there  shall  be  chosen  nine  persons,  who  shall  be  stockholders 
in  said  company,  to  be  the  directors  of  said  company  for  the  ensuing 
year.  A  notice  of  such  meeting,  either  written  or  printed,  or  partly 

3  Kent  v.  Mining  Co.,  78  N.  Y.  159 ;    Bergman  v.  Association,  2J> 
Minn.  275,  13  N.  W.  120. 
*  Supra,  §  84b. 

(HO) 


Ch.  6)  BY-LAWS.  §  136 

written  and  partly  printed,  shall  be  mailed  ten  days  before  such 
meeting  to  each  stockholder,  to  his  post-office  address  appearing 
upon  the  records  of  the  company,  in  addition  to  notice  required  by 
law  to  be  published. 

Sec.  3.  If,  for  any  reason,  the  annual  meeting  of  stockholders  shall 
not  be  held  as  hereinbefore  provided,  such  annual  meeting  shall  be 
called  by  the  president  and  directors  as  soon  as  conveniently  may 
be.  It  shall  be  the  duty  of  the  secretary,  on  the  written  request  of 
five  stockholders,  if  the  election  for  directors  has  not  been  held  as 
hereinbefore  provided,  to  call  a  meeting  of  the  stockholders  as  pro- 
vided in  section  2  for  the  election  of  directors. 

Sec.  4.  Special  meetings  of  the  stockholders  of  this  company  may 
be  called  at  any  time  by  the  president.  It  shall  also  be  the  duty  of 
the  president  to  call  a  special  meeting  of  the  stockholders,  whenever 
requested  in  writing  so  to  do,  by  stockholders  owning  ten  per  cent  of 
the  entire  capital  stock.  If  the  president  on  such  request  neglects 
for  24  hours  to  call  a  special  meeting,  then  the  stockholders  making 
the  request  may  call  a  special  meeting.  Notice  of  special  meetings 
shall  be  given  by  mailing  a  notice  thereof  to  each  stockholder,  to  his 
post-office  address  appearing  upon  the  record.;  of  the  company,  at 
least  ten  days  before  such  meeting.  Such  notice,  in  addition  to  stat- 
ing the  time  at  which  said  meeting  shall  be  held,  shall  briefly  state 
the  object  of  said  meeting,  and  no  business  not  so  stated  shall  be 
considered  at  such  meeting,  except  on  the  unanimous  consent  of  all 
stockholders  present,  in  person  or  by  proxy,  at  such  special  meeting. 

Sec.  5.  No  meetings  of  stockholders  shall  be  called  or  held  except 
as  authorized  by  the  law  of  the  state  of  New  York  or  these  by-laws. 

Sec.  6.  At  all  stockholders'  meetings,  stockholders  owning  at  least 
thirty  per  cent,  of  the  capital  stock  of  the  company,  and  present  in 
person  or  by  proxy,  shall  be  necessary  to  constitute  a  quorum. 

VOTING. 

Sec.  7.  At  all  annual  meetings  of  stockholders,  the  right  of  any 
stockholder  to  vote  shall  be  governed  and  determined  by  the  transfer 
records.  Only  such  persons  shall  be  entitled  to  vote  who  appear  as 
stockholders  upon  the  transfer  records  of  the  company. 

Sec.  8.  No  share  of  stock  shall  be  voted  upon  at  any  election  which 
has  been  transferred  on  the  records  of  the  company  within  ten  days 
next  preceding  such  election. 

Sec.  9.  Stockholders  may  give  proxies  to  vote  at  any  meeting. 

Sec.  10.  At  all  meetings  of  stockholders  all  questions  except  the 
question  of  an  amendment  of  these  by-laws,  and  the  question  of  the 
election  of  directors,  and  all  such  other  questions  the  decision  of 
which  is  specially  regulated  by  statute,  shall  be  determined  by  a 

(111) 


§  136  BUSINESS   CORPORATIONS.  (Ch.  6 

majority  vote  of  the  stockholders  present  in  person  or  by  proxy; 
and,  in  the  event  of  a  tie  vote,  the  presiding  officer  of  the  meeting 
shall  cast  the  deciding  vote,  provided  that  any  stockholder  present 
may  demand  a  stock  vote.  When  a  stock  vote  is  demanded  it  shall 
immediately  be  taken,  and  each  stockholder  present  shall  be  entitled 
to  one  vote  for  each  share  of  stock  he  owns,  as  appears  by  the  trans- 
fer records  as  hereinbefore  provided,  and  one  vote  for  each  share  of 
stock  so  owned  by  any  stockholder  whose  proxy  he  may  be,  and  the 
question  shall  be  decided  affirmatively  by  a  vote  of  not  less  than 
twenty-five  per  cent,  of  all  outstanding  shares  of  stock  of  said  com- 
pany. 

All  voting  shall  be  viva  voce,  except  that  a  stock  vote  and  vote  for 
the  election  of  directors  shall  be  by  ballot,  and  each  ballot  shall 
state  the  number  of  shares  owned  by  the  person  voting,  the  name 
of , the  person  voting,  and  the  word  "Yes,"  if  the  vote  be  an  affirma- 
tive vote,  and  the  word  "No,"  if  the  vote  be  a  negative  vote,  or  the 
name  of  the  person  voted  for  if  it  be  a  vote  for  the  election  of  a 
director. 

Sec.  11.  All  meetings,  either  of  stockholders  or  directors,  shall  be 
presided  over  by  the  president;  and  at  all  meetings  of  the  directors 
the  president  may  vote,  and  he  may  also  vote  at  any  stockholders' 
meeting  in  addition  to  the  case  provided  for  by  the  last  section, 
whenever  a  stock  vote  is  taken.  In  the  absence  of  the  president,  the 
vice-president  shall  preside,  and  shall  have  all  the  powers  herein 
conferred  upon  the  president  when  acting  as  presiding  officer  of  a 
meeting. 

INSPECTORS  OF  ELECTION. 

Sec.  12.  At  all  meetings  for  election  of  directors,  two  inspectors  of 
election  shall  be  first  elected  by  a  majority  stock  vote  of  all  the 
stockholders  present  at  the  meeting,  in  person  or  by  proxy,  provided 
that  no  person  who  is  a  candidate  for  the  office  of  director  shall  be 
elected  an  inspector. 

OKDEB  OF   BUSINESS. 

Sec.  13.  At  all  meetings  of  stockholders  the  following  order  of 
business  shall  be  observed,  so  far  as  consistent  with  the  purpose  of 
the  meeting,  viz.: 

Reading  minutes  of  preceding  meeting  and  action  thereou. 

Report  of  president. 

Report  of  treasurer. 

Report  of  secretary. 

Reports  of  committees. 

Election  of  directors. 

Unfinished  business. 

New  business. 
(112) 


Ch.  6)  BY-LAWS.  §  136 

ARTICLE  II. 

DIRECTORS. 

Section  1.  The  affairs  of  this  company  shall  be  managed  by  nine 
directors,  who  shall  be  annually  chosen  at  the  annual  meeting  of  the 
stockholders,  except  as  by  these  by-laws  otherwise  provided. 

Sec.  2.  All  elections  for  directors  shall  be  by  ballot,  and  the  poll 
at  every  such  election  shall  be  opened  between  the  hours  of  nine  a. 
m.  and  five  p.  m.  and  shall  continue  open  at  least  one  hour  by  day- 
light, and  shall  close  before  nine  o'clock  in  the  evening. 

Sec.  3.  In  case  a  vacancy  or  vacancies,  by  death,  resignation  or 
otherwise,  occurs  in  the  board  of  directors  between  the  time  of  the 
annual  meetings,  the  remaining  director  or  directors  shall  fill  the 
vacancy  or  vacancies,  by  choosing  from  the  stockholders  as  many 
persons  as  may  be  necessary  to  fill  the  vacancy  or  vacancies,  and  the 
person  or  persons  so  chosen  shall  be  directors  and  hold  office  until 
their  successors  are  elected. 

Sec.  4.  In  case  the  entire  board  of  directors  should  die  or  resign, 
then  any  stockholder  may  call  a  special  meeting  in  the  same  manner 
that  the  president  may  call  a  special  meeting,  and  new  directors 
may  be  elected  at  such  special  meeting  in  the  manner  provided  for 
the  election  of  directors  at  annual  meetings. 

Sec.  5.  Any  director  may  resign  his  office  at  any  time,  such  resig- 
nation to  be  made  in  writing,  and  it  shall  take  effect  from  the  time 
of  its  delivery  to  the  president  or  to  a  majority  of  the  board  of 
directors. 

Sec.  6.  Any  director  who  may  be  guilty  of  any  fraud,  or  crime, 
or  conduct  prejudicial  to  the  interests  of  this  company,  may  be  re- 
moved from  his  office  by  an  affirmative  majority  vote  of  the  other 
directors,  and  the  remaining  directors  shall  immediately  after  such 
vote  declare  the  office  of  such  director  vacant,  and  the  vacancy  so 
created  shall  be  filled  in  the  same  manner  any  other  vacancy  may 
be  filled. 

OTHER    OFFICERS. 

Sec.  7.  The  directors  so  chosen,  immediately  after  their  election, 
shall  hold  a  meeting,  at  which  they  shall  choose  from  among  their 
number  a  president  and  a  vice-president,  and  they  shall  at  the  same 
meeting  choose  a  secretary,  treasurer,  and  such  other  officers,  agents 
and  factors  as  they  may  deem  necessary,  who  shall  hold  their  offices 
until  others  are  chosen  and  qualified  in  their  stead. 

Sec.  8.  The  board  of  directors  shall  also  select  an  executive  com- 
mittee of  five  members,  including  the  president,  to  possess  and  dis- 
charge all  the  powers  of  the  board  of  directors  during  the  intervals 
between  its  meetings.  Of  this  committee  three  shall  constitute  a 
CLEPII. Bus. CORP.— 8  (113) 


§  136  BUSINESS    CORPORATIONS.  (Ch.  6 

quorum  for  the  transaction  of  business,  but  no  action  taken  by  it 
shall  be  valid  unless  the  same  have  the  affirmative  vote  of  at  least 
three  members. 

Sec.  9.  Said  board  of  directors  may  adopt  such  rules  and  regula- 
tions for  the  conduct  of  their  meetings  and  management  of  the  affairs 
of  this  company  as  they  may  deem  proper,  not  inconsistent  with  the 
law  of  the  state  of  New  York  or  these  by-laws. 

Sec.  10.  The  salary  of  all  officers  shall  be  fixed  by  a  majority  vote 
of  the  board  of  directors,  and  may  be  changed  from  time  to  time  as 
by  said  board  of  directors  may  be  determined. 

Sec.  11.  The  directors  may  hold  their  meetings  at  such  time  and 
times  and  place  and  places,  either  within  or  without  the  state,  as 
they  may  determine  upon.  Notice  of  such  meeting  shall  be  given  by 
mailing  a  notice  thereof  to  each  director,  to  his  post-office  address  as 
appearing  in  the  records  of  the  company,  not  less  than  three  days 
before  such  meeting. 

ARTICLE  III. 

POWERS   OF  OFFICERS. 

Section  1.  President. — The  president  shall  have  power  to  employ 
and  discharge  all  clerks,  employes  and  agents ;  subject,  however,  to 
the  right  of  the  board  of  directors  to  direct,  by  a  majority  vote,  the 
employment  of  any  agent  or  other  employe,  or  the  dismissal  of  any 
agent  or  employs.  The  president  shall  also  preside  at  all  meetings 
of  the  company,  or  meetings  of  the  stockholders  of  the  company, 
and  of  the  board  of  directors ;  shall  be  ex-officio  a  member  of  all  com- 
mittees, and  shall  perform  such  other  duties  as  he  may  be  directed 
to  perform  by  the  board  of  directors,  and  shall  have  a  general  over- 
sight over  the  business  and  affairs  of  the  company. 

Sec.  2.  Vice-President. — The  vice-president  shall,  in  the  absence  or 
incapacity  of  the  president,  perform  the  duties  of  that  officer. 

Sec.  3.  Treasurer. — The  treasurer  shall  deposit  the  money  and  se- 
curities belonging  to  this  company  in  such  bank  or  banks,  trust  com- 
panies and  safe-deposit  vaults  as  may  be  selected  by  the  board  of 
directors,  and  all  checks  or  other  orders  for  the  payment  of  money 
or  the  delivery  of  securities  belonging  to  this  company  shall  be  signed 
by  the  president  and  treasurer  or  by  such  other  person  with  the 
treasurer  as  the  board  of  directors  may  designate,  and  no  payment 
for  a  greater  sum  than  one  hundred  dollars  shall  be  made  except  by 
check.  The  treasurer  shall  also  keep  such  books  of  account  as  the 
directors,  or  a  majority  of  them,  may  direct.  A  report  of  the  finan- 
cial condition  of  the  company  shall  be  made  by  the  treasurer  to  the 
president  whenever  requested  by  the  president,  and  a  report  of  like 
character  shall  be  submitted  by  the  treasurer  at  the  annual  meeting; 
and  he  shall,  if  required  by  the  directors  at  any  time,  give  such  bond 
(1141 


Ch.  6)  BY-LAWS.  §  136 

as  the  directors  may  require,  and  failure  so  to  do  within  five  days 
thereafter  shall  be  held  to  forfeit  and  vacate,  and  shall  forfeit  and 
vacate,  the  office  of  treasurer.  Every  person  accepting  the  office  of 
treasurer  shall  hold  the  same  subject  to  the  last-mentioned  limita- 
tions. The  treasurer  shall  also  sign  all  certificates  of  stock,  and  per- 
form such  other  duties  as  the  board  of  directors  may  require. 

Sec.  4.  Secretary. — The  secretary  shall  be  sworn  to  the  faithful 
discharge  of  his  duty,  and  shall  record  all  the  votes  of  the  company 
and  directors  in  a  book  to  be  kept  for  that  purpose.  He  shall  record 
all  transfers  of  stocks  and  cancel  and  preserve  all  certificates  of 
stock  transferred,  and  he  shall  also  keep  a  record  alphabetically  ar- 
ranged of  all  persons  who  are  stockholders  of  this  company,  showing 
their  places  of  residence,  the  number  of  shares  of  stock  held  by  them 
respectively,  and  the  time  when  they  became  the  owners  of  such 
shares.  The  address  of  any  stockholder  shall  be  changed  whenever 
requested  in  writing  by  such  stockholder.  The  secretary  shall  also 
be  the  transfer  agent  of  the  company  for  the  transfer  of  all  certifi- 
cates of  stock.  He  shall  also  keep  the  seal  of  the  company,  and 
affix  the  same  to  all  certificates  of  stock  and  such  other  instruments 
requiring  the  seal  as  may  be  directed  by  the  board  of  directors.  The 
secretary  shall  also  keep  such  other  books  and  perform  such  other 
duties  as  may  be  assigned  to  him. 

ARTICLE  IV. 

STOCK. 

Section  1.  All  certificates  of  stock  shall  be  signed  by  the  president 
or  vice-president  and  treasurer,  and  be  attested  by  the  corporate  seal. 

Sec.  2.  Certificates  of  stock  may  be  transferred,  sold,  assigned  or 
pledged  by  an  endorsement  to  the  proper  effect  in  writing  on  the  back 
of  the  certificate,  and  delivery  of  such  certificate  by  the  transferrer 
to  the  transferee ;  provided  that  until  notice  given  of  such  transfer  to 
the  secretary  of  the  company,  and  the  surrender  of  the  certificate  of 
stock  for  cancellation,  and  the  issue  of  a  new  certificate  in  lieu  of 
that  surrendered,  this  company  may  regard  and  treat  the  transferrer 
as  being  still  the  owner  of  the  stock. 

Sec.  3.  All  surrendered  certificates  shall  be  marked  cancelled,  with 
the  date  of  cancellation,  by  the  secretary,  and  shall  be  immediately 
pasted  into  the  stock-book  opposite  the  memorandum  of  their  issue. 

Sec.  4.  Duplicate  certificates  of  stock  may  be  issued  for  such  as 
may  have  been  lost  or  destroyed,  upon  the  applicant  furnishing  (1) 
an  affidavit  of  ownership  and  loss  and  (2)  a  bond  of  indemnity  sat- 
isfactory to  the  company  and  conditioned  to  protect  the  company 
against  all  loss  and  damage  which  may  occur  in  consequence  of  the 
issue  of  said  duplicate  certificate.  And  no  such  duplicate  shall  be 

(115) 


§  136  BUSINESS    CORPORATIONS.  (Ch.  6 

issued  until  after  publication  once  a  week  for  three  weeks,  at  the 
expense  of  the  applicant,  of  a  notice  of  the  application  therefor  in 
some  newspaper  of  general  circulation  designated  by  the  president, 
published  in  the  city  of  the  applicant's  residence. 

ARTICLE  V. 

MISCELLANEOUS. 

Section  1.  The  seal  of  the  company  shall  be  circular  in  form,  with 

the  words  " "  on  the  circumference,  and  the 

words  "New  York"  in  the  centre. 

Sec.  2.  The  fiscal  or  business  year  of  the  company  shall  begin  on 
the  first  day  of  October  and  end  on  the  .thirtieth  day  of  September 
following. 

Sec.  3.  Dividends  shall  be  declared  annually,  or  more  frequently  if 
the  board  shall  so  direct,  from  the  surplus  or  net  profits  arising  from 
the  business  of  this  corporation. 

Sec.  4.  These  by-laws  may  be  amended  at  any  directors'  meeting 
by  vote  of  two-thirds  of  the  whole  board  of  directors.  They  may 
also  be  amended  at  any  stockholders'  meeting  by  a  vote  of  stockhold- 
ers owning  not  less  than  twenty-five  per  cent,  of  the  entire  capital 
stock  issued.  A  copy  of  such  amended  by-laws  shall  be  sent  to  each 
stockholder  within  thirty  days  after  their  adoption. 

§  137.     By-Laws  of   United   States   Steel   Corporation  as 
on  May  3,  1904. 

ARTICLE  I. 

STOCKHOLDERS. 

Section  1.     Annual  Meeting.    The   annual  meeting  of  the  stock- 
holders of  the  company  shall  be  held  annually  at  the 
stockholders'        principal  office  of  the  company  in  the  state  of  New 
Meeting.  Jersey,  at  twelve  o'clock  noon,  on  the  third  Monday  of 

April  in  each  year,  if  not  a  legal  holiday,  and  if  a 
legal  holiday  then  on  the  next  succeeding  Monday  not  a  legal  holi- 
day, for  the  purpose  of  electing  directors,  and  for  the  transaction 
of  such  other  business  as  may  be  brought  before  the 
Meeting  meeting;    and  the  terms  of  office  of  the  directors  of 

the   several  classes  shall  continue  until   the  election 
of  their  successors  at  such  meeting  as  provided  in  article  II  hereof. 
It  shall  be  the  duty  of  the  secretary  to  cause  notice  of  each  annual 
meeting  to  be  published  once  in  each  of  the  four  cal- 
Advertising          endar  weeks  next  preceding  the  meeting  in  at  least 
Meeting!  one  newspaper  in  each  of  the  following  places:    Jer- 

sey City,   N.  J.,   New  York,  N.  Y.,  Chicago,  111.,  and 
(116) 


Ch.  6)  BY-LAWS.  §  137 

Pittsburg,  Pa.  Nevertheless,  a  failure  to  publish  such  notice,  or  any 
irregularity  in  such  notice,  or  in  the  publication  thereof,  shall  not 
affect  the  validity  of  any  annual  meeting,  or  of  any  proceedings  at 
any  such  meeting. 

Section  2.     Special  Meetings.     Special  meetings  of  the  stockholders 

may  be  held  at  the  principal  office  of  the  company  in 
Meetings  tne  state  of  ^ew  Jersey,  whenever  called  in  writing, 

or  by  vote,  by  a  majority  of  the  board  of  directors. 
Notice  of  each  special   meeting,  indicating  briefly   the  object  or 

objects  thereof,  shall  by  the  secretary  be  published 
Advertising  once  in  each  of  the  four  calendar  weeks  next  preced- 

Notice  of  . 

Meeting.  iug  the  meeting,  in  at  least  one  newspaper  in  each  of 

the  following  places:  Jersey  City.  N.  J..  New  York, 
N.  Y.,  Chicago,  111.,  and  Pittsburg,  Pa.  Nevertheless,  if  all  the  stock- 
holders shall  waive  notice  of  a  special  meeting,  no  notice  of  such 
meeting  shall  be  required ;  and  whenever  all  the  stockholders  shall 
meet  in  person  or  by  proxy,  such  meeting  shall  be  valid  for  all  pur- 
poses without  call  or  notice,  and  at  such  meeting  any  corporate  ac- 
tion may  be  taken. 

Section  3.     Quorum.    At  any  meeting  of  the  stockholders  the  hold- 
ers of  one-third  of  all  of  the  shares  of  the  capital 
Quorum.  stock  of  the  company,  present  in  person  or  represented 

by  proxy,  shall  constitute  a  quorum  of  the  stockhold- 
ers for  all  purposes,  unless  the  representation  of  a  larger  number 
shall  be  required  by  law,  and,  in  that  case,  the  representation  of  the 
number  so  required,  shall  constitute  a  quorum. 

If  the  holders  of  the  amount  of  stock  necessary  to  constitute  a 
quorum  shall  fail  to  attend  in  person  or  by  proxy  at  the  time  and 
place  fixed  by  these  by-laws  for  an  annual  meeting,  or  fixed  by  notice 
as  above  provided  for  a  special  meeting  called  by  the  directors,  a 
majority  in  interest  of  the  stockholders  present  in  person  or  by  proxy 
may  adjourn,  from  time  to  time,  without  notice  other  than  by  an- 
nouncement at  the  meeting,  until  holders  of  the  amount  of  stock 
requisite  to  constitute  a  quorum  shall  attend.  At  any  such  adjourn- 
ed meeting  at  which  a  quorum  shall  be  present,  any  business  may  be 
transacted  which  might  have  been  transacted  at  the  meeting  as 
originally  notified. 

Section  4.     Organization.    The  chairman  of  the  board,  and  in  his 
absence,  the  chairman  of  the  finance  committee,  and 
Organization.        in  the  absence  of  both,  the  president,  shall  call  meet- 
ings of  the  stockholders  to  order,  and  shall  act  as 
chairman  of  such  meetings.     The  board  of  directors  may  appoint  any 
stockholder  to  act  as  chairman  of  any  meeting  in  the 
Chairman.  absence  of  the  chairman  of  the  board  and  of  the  chair- 

man of  the  finance  committee  and  of  the  president. 

(117) 


§  137  BUSINESS    CORPORATIONS.  (Ch.  6 

The  secretary  of  the  company  shall  act  as  secretary  at  all  meetings 

of  the  stockholders ;    but  in  the  absence  of  the  secre- 

Secretary.  tary  at  any  meeting  of  the  stockholders  the  presiding 

officer  may  appoint  any  person  to  act  as  secretary  of 

the  meeting. 

Section   5.     Voting.     At  each  meeting  of  the  stockholders,   every 
stockholder  shall  be  entitled  to  vote  in  person,  or  by 
Voting.  proxy  appointed  by  instrument  in  writing,  subscribed 

by  such  stockholder  or  by  his  duly  authorized  attor- 
ney, and  delivered  to  the  inspectors  at  the  meeting ;  and  he  shall 
have  one  vote  for  each  share  of  stock  standing  registered  in  his 
name  at  the  time  of  the  closing  of  the  transfer  books  for  said  meet- 
ing. The  votes  for  directors,  and,  upon  demand  of  any  stockholder, 
the  votes  upon  any  question  before  the  meeting,  shall  be  by  ballot 
At  each  meeting  of  the  stockholders,  a  full,  true  and  complete  list, 
in  alphabetical  order,  of  all  of  the  stockholders  en- 
stockholders  titled  to  vote  at  such  meeting,  and  indicating  the  num- 
ber of  shares  held  by  each,  certified  by  the  secretary 
or  by  the  treasurer,  shall  be  furnished.  Only  the  persons  in  whose 
names  shares  of  stock  stand  on  the  books  of  the  company  at  the 
time  of  the  closing  of  the  transfer  books  for  such  meeting,  as  evi- 
denced by  the  list  of  stockholders  so  furnished,  shall  be  entitled  to 
vote  in  person  or  by  proxy  on  the  shares  so  standing  in  their  names. 
Prior  to  any  meeting,  but  subsequent  to  the  time  of  closing  tho 
transfer  books  for  such  meeting,  any  proxy  may  submit  his  powers  of 
attorney  to  the  secretary,  or  to  the  treasurer,  for  examination.  Tho 
certificate  of  the  secretary,  or  of  the  treasurer,  as  to  the  regularity 
of  such  powers  of  attorney,  and  as  to  the  number  of  shares  held  by 
the  persons  who  severally  and  respectively  executed  such  powers  of 
attorney,  shall  be  received  as  priina  facie  evidence  of  the  number 
of  shares  represented  by  the  holder  of  such  powers  of  attorney  for 
the  purpose  of  establishing  the  presence  of  a  quorum  at  such  meet- 
ing and  of  organizing  the  same,  and  for  all  other  purposes. 

Section  6.     Inspectors.    At  each  meeting  of  the  stockholders,  the 
polls  shall  be  opened  and  closed,  the  proxies  and  bal- 

EieStton™  °f  lots  sha11  be  received  »nd  be  taken  in  charge,  and  all 
questions  touching  the  qualification  of  voters  and  the 
validity  of  proxies  and  the  acceptance  or  rejection  of  votes,  shall  be 
decided  by  three  inspectors.  Such  inspectors  shall  be  appointed  by 
the  board  of  directors  before  or  at  the  meeting,  or,  if  no  such  appoint- 
ment shall  have  been  made,  then  by  the  presiding  officer  at  the  meet- 
ing. If  for  any  reason  any  of  the  inspectors  previously  appointed 
shall  fail  to  attend  or  refuse  or  be  unable  to  serve,  inspectors  in 
place  of  any  so  failing  to  attend  or  refusing  or  unable  to  attend, 
shall  be  appointed  in  like  manner. 
(118) 


Ch.  6)  BY-LAWS.  §  137 

ARTICLE  II. 

BOARD    OF    DIRECTORS. 

Section  1.     Number,  Classification  and  Term  of  Office.    The  busi- 
ness and  the  property  of  the  company  shall  be  man- 
aged and  controlled  by  the  board  of  directors. 
As  provided  in  the  certificate  of  incorporation,  the  directors  shall 
be  classified  in  respect  of  the  time  for  which   they 
Classification.       shall  severally  hold  office,  by  dividing  them  into  three 
classes,  each  class  consisting  of  one-third  of  the  whole 
number  of  the  board  of  directors.    The  directors  of  the  first  class 
shall  be  elected  for  a  term  of  one  year ;   the  directors  of  the  second 
class  shall  be  elected  for  a  term  of  two  years,  and  the 
EarchSc?ass  directors  of  the  third  class  shall  be  elected  for  a  term 

of  three  years.  At  each  annual  election,  the  succes- 
sors to  the  directors  of  the  class  whose  term  shall  expire  in  that 
year,  shall  be  elected  to  hold  office  for  the  term  of  three  years,  so 
that  the  term  of  office  of  one  class  of  directors  shall  expire  in  each 
year. 

The  nurnber  of  directors  shall  be  twenty-four ;    but  the  number  of 
directors   may  be  altered  from  time  to  time  by  the 
Directore°f  alteration  of  these  by-laws. 

In  case  of  any  increase  of  the  number  of  directors, 
the  additional  directors  shall  be  elected  by  the  directors  then  in 
office ;  one-third  of  such  additional  directors  for  the  unexpired  por- 
tion of  the  term  of  one  year ;  one-third  for  the  unexpired  portion  of 
the  term  of  two  years,  and  one-third  for  the  unexpired  portion  of 
the  term  of  three  years,  so  that  each  class  of  directors  shall  be  in- 
creased equally. 

Every  director  shall  be  a  holder  of  at  least  one  share  of  the  capital 

_..      .  stock  of  the  company.     Each  director  shall  serve  for 

Directors 

must  be  the  term  for  which  he  shall  have  been  elected,  and 

Stockholders.  until  hig  successor  snali  ]iave  been  duly  chosen. 

At  all  elections  of  the  directors,  the  polls  shall  remain  open  for  at 

least  one  hour,  unless  every  registered  owner  of  shares 

Polls  Open  jjas  sooner  voted  in  person  or  by  proxy,  or  in  writing 

has  waived  the  statutory  provision. 

Section  2.     Vacancies.     In  case  of  any  vacancy  in  the  directors  of 

any  class  through  death,  resignation,  disqualification 

ii^Board8  or  °*ner  cause?  the  remaining  directors,  by  affirmative 

vote  of  a  majority  thereof,  may  elect  a  successor  to 

hold  office  for  the  unexpired  portion  of  the  term  of  the  director  whose 

place  shall  be  vacant,  and  until  the  election  of  his  successor. 

Such  vacancy  shall  be  filled  upon  and  after  nominations  therefor 
shall  have  been  made  by  the  finance  committee. 

(119) 


§  137  BUSINESS   CORPORATIONS.  (Ch.  6 

Section  3.  Place  of  Meeting,  Etc.  The  directors  may  hold  their 
meetings,  and  may  have  an  office  and  keep  the  books 

Meeting  °^  *ne  company  (except  as  otherwise  may  be  provided 

for  by  law)  in  such  place  or  places  in  the  state  of  New 

Jersey  or  outside  of  the  state  of  New  Jersey,  as  the  board  from  time 

to  time  may  determine. 

Section  4.  Regular  Meetings.  Regular  meetings  of  the  board  of 
directors  shall  be  held  monthly  on  the  last  Tuesday 

Regular  of  each  month,  if  not  a  legal  holiday,  and  if  a  legal 

Meetings.  holiday,  then  on  the  next  succeeding  Tuesday  not  a 

legal  holiday.     No  notice  shall   be  required   for  any 

such  regular  monthly  meeting  of  the  board. 

Section  5.  Special  Meetings.  Special  meetings  of  the  board  of 
directors  shall  be  held  whenever  called  by  direction 
of  the  chairman  of  the  board,  or  the  chairman  of  the 

1x166  lingS. 

finance  committee,  or  the  president,  or  of  one-third  of 
the  directors  for  the  time  being  in  office. 

The  secretary  shaH  give  notice  of  each  special  meeting  by  mailing 

the  same  at  least  two  days  before  the  meeting,  or  by 

Required  telegraphing  the  same   at   least  one   day   before  the 

meeting,   to  each  director ;    but  such  notice  may  be 

waived  by  any  director.     Unless  otherwise  indicated  in  the  notice 

thereof,  any  and  all  business  may  be  transacted  at  a  special  meeting. 

At  any  meeting  at  which  every  director  shall  be  present,  even  though 

without  any  notice,  any  business  may  be  transacted. 

Section  6.     Quorum.    A  majority  of  the  board  of  directors  shall 

constitute  a  quorum  for  the  transaction  of  business ; 

Quorum.  but  if  at  any  meeting  of  the  board  there  be  less  than 

a  quorum  present,  a  majority  of  those  present  may 

adjourn  the  meeting  from  time  to  time. 

The  affirmative  vote  of  at  least  two-fifths  of  all  the  directors  for 
the  time  being  in  office  shall  be  necessary  for  the  passage  of  any  reso- 
lution. 

Section  8.     Order  of  Business.     At  meetings  of  the  board  of  direct- 
ors  business   shall    be  transacted   in   such   order   as, 
Business  from  time  to  time,  the  board  may  determine  by  reso- 

lution. 

At   all  meetings  of  the  board  of  directors,  the  chairman  of  the 

board,  or  in  his  absence  the  chairman  of  the  finance 

Offlcering  committee,  or,  in  the  absence  of  both  of  these  officers, 

the  president,  shall  preside. 

Section  9.     Contracts.     Inasmuch  as  the  directors  of  this  company 

are  men  of  large  and  diversified   business  interests, 

Contracts.  and  are  likely  to  be  connected  with  other  corporations 

with  which  from  time  to  time  this  company  must  have 

(120) 


Ch.  6)  BY-LAWS.  §  137 

business  dealings,  no  contract  or  other  transaction  between  this  com- 
pany and  any  other  corporation  shall  be  affected  by  the  fact  that 
directors  of  this  company  are  interested  in,  or  are  directors  or  offi- 
cers of,  such  other  corporation,  if,  at  the  meeting  of  the  board,  or  of 
the  committee  of  this  company,  making,  authorizing  or  confirming 
such  contract  or  transaction,  there  shall  be  present  a  quorum  of 
directors  not  so  interested;  and  any  director  Individ- 
Requiring  Vote  ually  may  be  a  party  to,  or  may  be  interested  in,  any 
?*  Interested'611  contract  or  transaction  of  this  company,  provided 
Directors.  that  such  contract  or  transaction  shall  be  approved 

or  be  ratified  by  the  affirmative  vote  of  at  least  ten 
directors  not  so  interested. 

The  board  of  directors  in  its  discretion  may  submit  any  contract 
or   act    for   approval   or    ratification   at   any    annual 
Ratification  by     meeting  of  the  stockholders,  or  at  any  meeting  of  the 
of{Acte0lo3rerS        stockholders  called  for  the  purpose  of  considering  any 
Contracts.  SUch  act  or  contract ;    and  any  contract  or  act  that 

shall  be  approved  or  be  ratified  by  the  vote  of  the 
holders  of  a  majority  of  the  capital  stock  of  the  company  which  is 
represented  in  person  or  by  proxy  at  such  meeting  (provided  that  a 
lawful  quorum  of  stockholders  be  there  represented  in  person  or  by 
proxy)  shall  be  as  valid  and  as  binding  upon  the  corporation  and 
upon  all  the  stockholders  as  though  it  had  been  approved  or  ratified 
by  every  stockholder  of  the  corporation. 

Section   10.     Compensation  of  Directors.    For   his   attendance   at 

any  meeting  of  the  board  of  directors,  or  of  any  com- 

of°Dh-ectors°n       niittee,  every  director  shall  receive  an  allowance  of 

twenty  dollars  for  attendance  at  each  meeting. 
Section  11.     Election  of  Officers  and  Committees.    At  the  first  reg- 
ular meeting  of  the  board  of  directors  in  each  year 
Election  of  (at  which  a  quorum  shall  be  present)  held  next  after 

Committees.  the  annual  meeting,  the  board  of  directors  shall  pro- 
ceed to  the  election  of  the  executive  officers  of  the 
company,  and  of  the  finance  committee  to  be  elected  by  the  board  of 
directors  under  the  provisions  of  article  III  and  article  IV  of  the 
by-laws. 

ARTICLE  III. 

FINANCE    COMMITTEE. 

Section  1.     The  board  of  directors  shall  elect  from  the  directors  a 

finance  committee,  and  shall  designate  for  such  com- 

Coramittee  mittee  a  chairman,  who  shall  continue  to  be  chairman 

of  the  committee  during  the  pleasure  of  the  board  of 

directors. 

(121) 


§  137  BUSINESS    CORPORATIONS.  (Ch.  6 

The  board  of  directors  shall  fill  vacancies  in  the  finance  committee 
by  election  from  the  directors ;    and  at  all  times  it 

How  Fmld.         sha11  be  the  duty  of  the  board  of  directors  to  keep  the 
membership  of  such  committee  full,  with  due  regard 
to  the  qualifications  for  such  membership  indicated  in  this  article 
of  the  by-laws. 

All  action  by  the  finance  committee  shall  be  reported  to  the  board 

of  directors  at  its  meeting  next  succeeding  such  ac- 

Action  of  tion,  and  shall  be  subject  to  revision  or  alteration  by 

to'be^Reported      tne  DOard  of  directors;    provided  that  no  rights  or 

to  Board.  acts  of  third  parties  shall  be  affected  by  any  such 

revision  or  alteration. 

The  finance  committee  shall  fix  its  own  rules  of  proceeding,  and 
shall  meet  where  and  as  provided  by  such  rules,  or  by 
Procedure  resolution  of  the  board  of  directors,  but  in  every  case 

the  presence  of  at  least  four  members  shall  be  nec- 
essary to  constitute  a  quorum. 

In  every  case  the  affirmative  vote  of  a  majority  of  all  of  the  mem- 
bers of  the  committee  present  at  the  meeting,  shall  be  necessary  to 
its  adoption  of  any  resolution. 

Section  2.     The  finance  committee  shall  consist  of  seven  members, 
besides  the  chairman  of  the  board  and  the  president, 
Membership.         each  of  whom,  by  virtue  of  his  office,  shall  be  a  mem- 
ber of  the  finance  committee.     So  far  as  practicable 
each  of  the  seven  elected  members  of  the  finance  committee  shall  be 
a  person  of  experience  in  matters  of  finance.     Unless  otherwise  or- 
dered by  the  board  of  directors,  each  elected  member  of  the  finance 
committee  shall  continue  to  be  a  member  thereof  until  the  expiration 
of  his  term  of  office  as  a  director. 

The  finance  committee  shall  have  special  charge  and  control  of  all' 

financial  affairs  of  the  company.     The  general  coun- 

Duttes8  and          sel>  tne  treasurer»  tne  comptroller  and  the  secretary. 

and  their  respective  offices,  shall  be  under  the  direct 

control  and  supervision  of  the  finance  committee. 

Diiring  the  intervals  between  the  meetings  of  the  board  of  direct- 
ors, the  finance  committee  shall  possess,  and  may  exercise,  all  the 
powers  of  the  board  of  directors  in  the  management  of  all  of  the 
affairs  of  the  company,  including  its  purchases  of  property,  and  the 
execution  of  legal  instruments  with  or  without  the  corporate  seal 
in  such  manner  as  said  committee  shall  deem  to  be  best  for  the  in- 
terests of  the  company,  in  all  cases  in  which  specific  directions  shall 
not  have  been  given  by  the  board  of  directors. 
During  the   intervals  between  the  meetings  of  the   finance  com- 
(122) 


Ch.  6)  BY-LAWS.  §  137 

mittee,  and  subject  to  its  review,  the  chairman  of  the  board  and  the 
chairman   of   the    finance   committee    together,    shall 
Chairmen.  possess,  and  may  exercise  any  of  the  powers  of  the 

committee,  except  as  from  time  to  time  shall  be  oth- 
erwise provided  by  resolution  of  the  board  of  directors. 

Except  as  otherwise  provided  by  the  by-laws,  or  by  resolution  of 
the  board  of  directors,  all  salaries  and  compensations 

Salaries  Fixed      paid  or  payable  by  the  company  shall  be  fixed  by  the 

by  Finance 

Committee.  finance  committee. 

No  director  not  an  executive  officer  shall  become  a 
salaried  employee  of  the  company  except  by  special  vote  of  the 
finance  committee. 

ARTICLE  IV. 

ADVISORY   COMMITTEE. 

The  board  of  directors  shall  elect  from  the  directors  an  advisory 

committee.      The    committee    shall    consist    of    three 

Committee  members,  besides  the  president  of  the  corporation,  who 

by  virtue  of  his  office  shall  be  a  member  and  chairman 

of  the  committee.     This  committee,  from  time  to  time,  shall  consider 

and   make  recommendations  concerning  such  questions   relating   to 

manufacturing,  transportation  or  operation  as  may  be  submitted  to 

the  committee  by  the  president. 

ARTICLE  V. 
OFFICERS. 

Section  1.     Officers.    The  executive  officers  of  the  company  shall 
be  a  chairman  of  the  board  of  directors,  a  president, 
Officers.  a  vice-president,  or  more  than  one  vice-president,  a 

Titles.  general  counsel,  a  treasurer,  a  secretary  and  a  comp- 

troller, all  of  whom  shall  be  elected  by  the  board  of 
directors. 

The  board  of  directors  may  appoint  such  other  officers  as  they 

shall  deem  necessary,  who  shall  have  such  authority 

other  Officers.      and  shall  perform  such  duties  as  from  time  to  time 

may  be  prescribed  by  the  board  of  directors. 

The  powers  and  duties  of  the  treasurer  and  secretary  may  be  ex- 
ercised and  performed  by  the  same  person. 

In  its  discretion,  the  board  of  directors  by  the  vote  of  a  majority 
thereof  may  leave  unfilled  for  any  such  period  as  it  may  fix  by  reso- 
lution, any  office  except  those  of  president,  treasurer,  secretary  and 
comptroller. 

(123) 


§  137  BUSINESS   CORPORATIONS.  (Ch.  6 

All  officers  and  agents  shall  be  subject  to  removal  at  any  time  by 
the  affirmative  vote  of  a  majority  of  the  whole  board 
Term  of  Office,     of  directors.     All  officers,  agents  and  employees,  other 
than  officers  appointed  by  the  board  of  directors,  shall 
hold  office  at  the  discretion  of  the  committee  or  of  the  officer  ap- 
pointing them. 

Each  of  the  salaried  officers  of  the  corporation  shall  devote  his 
entire  time,  skill  and  energy  to  the  business  of  the  corporation,  unless 
the  contrary  is  expressly  consented  to  by  the  board  of  directors  or 
the  finance  committee.  No  vacations  shall  be  taken  by  any  of  such 
officers,  except  by  consent  of  the  board  of  directors  or  the  finance 
committee. 

The  finance  committee   shall   have  power   to  remove  all  officers, 

agents  and  employees  of  the  company,  except  officers 

elected  or  appointed  by  the  board  of  directors. 

Section  3.     Powers   and  Duties  of  the  Chairman   of  the   Board. 

The  chairman  of  the  board  of  directors  shall  preside 

Chairman.  at  all  meetings  of  the  stockholders  and  of  the  board 

Powers  and 

Duties.  of  directors;    and  by  virtue  of  his  office  shall  be  a 

member  of  the  finance  committee.  He  shall  have  su- 
pervision of  such  matters  as  may  be  designated  to  him  by  the  board 
of  directors  or  the  finance  committee. 

Section  4.     Powers  and  Duties  of  the  President.     In  the  absence  of 
the  chairman  of  the  board  and  the  chairman  of  the 

President.  finance  committee,  the  president  shall  preside  at  all 

Powers  and 

Duties.  meetings  of  the  stockholders   and   of  the   board  of 

directors.  By  virtue  of  his  office  he  shall  be  a  mem- 
ber of  the  finance  committee.  Subject  to  the  board  of  directors  and 
the  finance  committee,  he  shall  have  general  charge  of  the  business 
of  the  corporation  relating  to  manufacturing,  mining  and  transporta- 
tion and  general  operation.  He  shall  keep  the  board  of  directors 
and  the  finance  committee  fully  informed,  and  shall  freely  consult 
them  concerning  the  business  of  the  corporation  in  his  charge.  He 
may  sign  and  execute  all  authorized  bonds,  contracts,  checks  or  other 
obligations  in  the  name  of  the  corporation,  and  with  the  treasurer 
or  an  assistant  treasurer  may  sign  all  certificates  of  the  shares  in 
the  capital  stock  of  the  corporation.  He  shall  do  and  perform  such 
other  duties  as  from  time  to  time  may  be  assigned  to  him  by  the 
board  of  directors. 

Section  5.     Vice-Presidents.    The  board  of  directors  may  appoint 
a    vice-president    or    more    than    one    vice-president. 
Presidents  Each  vice-president  shall  have  such  powers,  and  shall 

perform  such  duties,  as  may  be  assigned  to  him  by  the 
board  of  directors. 
(124) 


Ch.  6)  BY-LAWS.  §  137 

Section  6.     The  General  Counsel.    The  general   counsel  shall  be 

the  chief  consulting  officer  of  the  company  in  all  legal 

Counsel  matters,  and  subject  to   the  board  of  directors  and 

the  finance  committee,  shall  have  general  control  of 

all  matters  of  legal  import  concerning  the  company. 

Section  7.     Forcers  and  Duties  of  Treasurer.    The  treasurer  shall 

have  custody  of  all  the  funds  and  securities  of  the  company  which 

may  have  come  into  his  hands;    when  necessary  or 

Treasurer.  proper  he  shall  endorse  on  behalf  of  the  company,  for 

Powers  and  ...      ,.  , 

Duties.  collection,    checks,   notes   and   other   obligations,   and 

shall  deposit  the  same  to  the  credit  of  the  company  in 
such  bank  or  banks  or  depositary  as  the  board  of  directors  or  the 
finance  committee  may  designate ;  he  shall  sign  all  receipts  and 
vouchers  for  payments  made  to  the  company ;  jointly  with  such  other 
officer  as  may  be  designated  by  the  finance  committee,  he  shall  sign 
all  checks  made  by  the  company,  and  shall  pay  out  and  dispose  of 
the  same  under  the  direction  of  the  board  or  of  the  finance  commit- 
tee ;  he  shall  sign  with  the  president,  or  such  other  person  or  persons 
as  may  be  designated  for  the  purpose  by  the  board  of  directors  or 
the  finance  committee,  all  bills  of  exchange  and  promissory  notes  of 
the  company ;  he  may  sign,  with  the  president  or  a  vice-president, 
all  certificates  of  shares  in  the  capital  stock :  whenever  required  by 
the  board  of  directors  or  by  the  finance  committee,  he  shall  render 
a  statement  of  his  cash  account ;  he  shall  enter  regularly,  in  books 
of  the  company  to  be  kept  by  him  for  the  purpose,  full  and  accurate 
account  of  all  moneys  received  and  paid  by  him  on  account  of  the 
company  ;  he  shall,  at  all  reasonable  times,  exhibit  his  books  and 
accounts  to  any  director  of  the  company  upon  application  at  the 
office  of  the  company  during  business  hours ;  and  he  shall  perform 
all  acts  incident  to  the  position  of  treasurer,  subject  to  the  control 
of  the  board  of  directors  or  of  the  finance  committee. 

lie  shall  give  a  bond  for  the  faithful  discharge  of  his  duties  in 
such  sum  as  the  board  of  directors  or  the  finance  committee  may 
require. 

Section  8.    Assistant  Treasurers.    The  board  of  directors  or  the 

finance  committee  may  appoint  an  assistant  treasurer 

Treasurers  or  more  than  one  assistant  treasurer.     Each  assistant 

treasurer  shall  have  such  powers  and  shall  perform 

such  duties  as  may  be  assigned  to  him  by  the  board  of  directors,  or 

by  the  finance  committee. 

Section  9.  Powers  and  Duties  of  Secretary.  The  secretary  shall 
keep  the  minutes  of  all  meetings  of  the  board  of  di- 

Secretary.  rectors,  and  the  minutes  of  all  meetings  of  the  stock- 

Powers  and 
nuties.  holders,  and   also  (unless  otherwise  directed  by   the 

finance  committee)  the  minutes  of  all  committees,  in 

(125) 


§  137  BUSINESS    CORPORATIONS.  (Ch.  6 

books  provided  for  that  purpose;  he  shall  attend  to  the  giving  and 
serving  of  all  notices  of  the  company;  he  may  sign  with  the  presi- 
dent, in  the  name  of  the  company,  all  contracts  authorized  by  the 
board  of  directors  or  by  the  finance  committee,  and,  when  so  ordered 
by  the  board  of  directors  or  the  finance  committee,  he  shall  affix  the 
seal  of  the  company  thereto ;  he  shall  have  charge  of  the  certificate 
books,  transfer  books  and  stock  ledgers,  and  such  other  books  and 
papers  as  the  board  of  directors  or  the  finance  committee  may  direct, 
all  of  which  shall,  at  all  reasonable  times,  be  open  to  the  examina- 
tion of  any  director,  upon  application  at  the  office  of  the  company 
during  business  hours ;  and  he  shall  in  general  perform  all  the 
duties  incident  to  the  office  of  secretary,  subject  to  the  control  of  the 
board  of  directors  and  of  the  finance  committee.  The  offices  of  sec- 
retary and  of  treasurer  may  be  held  by  one  and  the  same  person. 
Section  10.  Assistant  Secretaries.  The  board  of  directors  or  the 
finance  committee  may  appoint  one  assistant  secre- 
Secretaries  *arv  or  more  than  one  assistant  secretary.  Each  as- 

sistant secretary  shall  have  such  powers  and  shall  per- 
form such  duties  as  may  be  assigned  to  him  by  the  board  of  directors 
or  by  the  finance  committee. 

Section  11.     Comptroller.    The  comptroller  shall  be  the  principal 

officer  in  charge  of  the  accounts  of  the  company,  and 

Comptroller.         shall  perform  such  duties  as  from  time  to  time  may 

be  assigned  to  him  by  the  board  of  directors  or  the 

finance  committee. 

Section  12.     Voting  upon  Stocks.     Unless  otherwise  ordered  by  the 
board  of  directors  or  by  the  finance  committee,  the 
Voting  Upon        chairman  of  the  board  or  the  chairman  of  the  finance 
fn°cnhe°Wned       committee  shall  have  full  power  and  authority  in  be- 
Companies.  half  of  the  company  to  attend  and  to  act  and  to  vote 

at  any  meetings  of  stockholders  of  any  corporation  in 
which  the  company  may  hold  stock,  and  at  any  such  meeting  shall 
possess  and  may  exercise  any  and  all  the  rights  and  powers  incident 
to  the  ownership  of  such  stock,  and  which,  as  the  owner  thereof,  the 
company  might  have  possessed  and  exercised  if  present.  The  board 
of  directors  or  the  finance  committee,  by  resolution,  from  time  to 
time,  may  confer  like  powers  upon  any  other  person  or  persons. 

AKTICLE  VI. 

CAPITAL    STOCK— SEAL. 

Section  1.     Certificates  of  Shares.     The  certificates  for  shares  of 

the  capital  stock  of  the  company  shall  be  in  siich  form. 

Certificates  no*  inconsistent  with  the  certificate  of  incorporation, 

as  shall  be  prepared  or  be  approved  by  the  board  of 

(126) 


Ch.  6)  BY-LAWS.  §  137 

directors.     The  certificates  shall  be  signed  by  the  president  or  a  vice- 
president,  and  also  by  the  treasurer  or  an  assistant  treasurer. 

All  certificates  shall  be  consecutively  numbered.  The  name  of  the 
person  owning  the  shares  represented  thereby,  with  the  number  of 
such  shares  and  the  date  of  issue,  shall  be  entered  on  the  company's 
books. 

No  certificate  shall  be  valid  unless  it  is  signed  by  the  president  or 
a  vice-president,  and  by  the  treasurer  or  an  assistant  treasurer. 

All  certificates  surrendered  to  the  company  shall  be  canceled,  and 
no  new  certificate  shall  be  issued  until  the  former  certificate  for  the 
same  number  of  shares  of  the  same  class  shall  have  been  surrendered 
and  canceled. 

Section  2.     Transfer  of  Shares.     Shares  in  the  capital  stock  of  the 
company  shall  be  transferred  only  on  the  books  of  the 
company  by  the  holder  thereof  in  person,  or  by  his 
attorney,  upon   surrender  and  cancellation  of  certifi- 
cates for  a  like  number  of  shares. 

Section  3.    Regulations.    The  board  of  directors,  and  the  finance 
committee  also,   shall   have  power   and  authority  to 
Regulations.         make  all  such  rules  and  regulations  as  respectively 
they  may  deem  expedient,  concerning  the  issue,  trans- 
fer and  registration  of  certificates  for  shares  of  the  capital  stock  of 
the  company. 

The   board  of  directors  or  the  finance  committee  may  appoint  a 

transfer  agent  and  a  registrar  of  transfers,  and  may 

Transfer  require   all   stock   certificates   to   bear   the   signature 

*Vj?GDt 

Registrar.  of  such  transfer  agent  and  of  such  registrar  of  trans- 

fers. 

Section  4.     Closing  of  Transfer  Books.    The  stock  transfer  books 

shall  be  closed  for  the  meetings  of  the  stockholders, 

Closing  of  and  for  the  payment  of  dividends,  during  such  periods 

Books.  as  from  time  to  time  may  be  fixed  by  the  board  of 

directors  or  by  the  finance  committee,  and  during  such 

periods  no  stock  shall  be  transferable. 

Section  5.  Dividends.  The  board  of  directors  may  declare  divi- 
dends from  the  surplus  or  from  the  net  profits  of  the  company. 

The  dates  for  the  declaration  of  dividends  -upon  the  preferred  stock 
and  upon  the  common  stock  of  the  company  shall  be  the  days  by  these 
by-laws  fixed  for  the  regular  monthly  meetings  of  the  board  of  di- 
rectors in  the  months  of  April,  July,  October  and  January  in  each 
year,  on  which  days  the  board  of  directors,  in  its  discretion,  shall 
declare  what,  if  any,  dividends  shall  be  declared  upon  the  preferred 
stock  and  the  common  stock,  or  either  of  such  stocks. 
The  dividends  upon  the  preferred  stock,  if  declared,  severally  and 

(127) 


§  137  BUSINESS   CORPORATIONS.  (Ch.  6 

respectively,  shall  be  payable  quarterly  upon  the  thirtieth  day  of 
May,  of  August,  of  November  and  the  last  day  of  February  in  each 
year. 

The  dividends  upon  the  common  stock,  if  declared,  severally  and 
respectively,  shall  be  payable  quarterly  on  the  thirtieth  day  of  June, 
of  September,  of  December  and  of  March  in  each  year. 

If  the  date  herein  appointed  for  the  payment  of  any  dividend  shall 
in  any  year  fall  upon  a  legal  holiday,  then  the  dividend  payable  on 
such  date  shall  be  paid  on  the  next  day  not  a  legal  holiday. 

Section  6.     Worldng  Capital.    The  directors  shall  not  be  required 

in  January   in   each  year,   after  reserving  over   and 

working  above  its  capital  stock  paid  in,  as  a  working  capital 

\^3.pll3.1. 

for  said  corporation,  such  sum,  if  any,  as  shall  have 
been  fixed  by  the  stockholders,  to  declare  a  dividend  among  its  stock- 
holders of  the  whole  of  its  accumulated  profits  exceeding  the  amount 
so  reserved,  and  pay  the  same  to  such  stockholders  on  demand ;  but 
the  board  of  directors  may  fix  a  sum  which  may  be  set  aside  or  re- 
served, over  and  above  the  company's  capital  paid  in,  as  a  working 
capital  for  the  company,  and  from  time  to  time  they  may  increase, 
diminish  and  vary  the  same  in  their  absolute  judgment  and  discre- 
tion. 

Section  7.     Corporate  Seal.     The  board  of  directors  shall  provide 

a  suitable  seal,  containing  the  name  of  the  company. 
Corporate  Seal,  which  seal  shall  be  in  charge  of  the  secretary.  If 

and  when  so  directed  by  the  board  of  directors  or  by 
the  finance  committee,  a  duplicate  of  the  seal  may  be  kept  and  be 
used  by  the  treasurer  or  by  any  assistant  secretary  or  assistant 
treasurer. 

ABTICLE  VII. 

AMENDMENTS. 

Section   1.     The  board   of  directors   shall   have   power  to   make, 
amend   and  repeal   the  by-laws  of  the  company,   by 
Amendments.        vote  of  a  majority  of  all  of  the  directors,  at  any  regu- 
lar or  special   meeting  of  the  board,   provided   that 
notice  of  intention  to  make,  amend  or  repeal  th?  by-laws  in  whole  or 
in  part  shall  have  been  given  at  the  next  preceding  meeting ;    or 
without  any  such  notice,  by  a  vote  of  two-thirds  of  all  the  directors. 
(128) 


Ch.  7)  FIRST    MEETING    OF    DIRECTORS.  §  138 

CHAPTER  VH. 

FIRST  MEETING  OF  DIRECTORS. 

§  138.  Place  of  Holding. 

139.  Proxies. 

140.  Time  of  Holding. 

141.  Waiver  of  Notice. 

142.  Organization. 

143.  Minutes  of  Incorporators'  Meeting. 

144.  Election  of  Officers. 
144a.  Secretary's  Oath. 

145.  Form  of  Secretary's  Oath. 

146.  Treasurer's  Bond. 

147.  Form  of  Treasurer's  Bond. 

148.  Election  of  Executive  Committee. 

149.  Exchanging  Stock  for  Property. 
149a.  Increasing  Stock. 

150.  Fixing  Form  of  Stock  Certificate. 

151.  Designating  Bank. 

152.  Establishing  Office,  Etc. 

153.  Powers  of  Attorney,  Etc. 
1.14.  Reports,  Etc. 

l.">5.  Authorizing  Payments,  Etc. 

156.  Directors'  Functions  Distinguished  from  Stockholders'. 

157.  Form  of  Minutes. 

158.  Meeting  of  Executive  Committee. 

§  138.     Place  of  Holding  Meeting. 

Sufficient  has  already  been  said  1  to  indicate  that  the  firsf 
meeting  of  directors  should  be  held  within  the  state  granting 
the  charter,  unless  the  statutes  of  that  state  permit  the  meet- 
ing to  be  held  elsewhere,  and  that  even  in  that  case  the  wise 
course  is  to  convene  and  transact  the  business  of  this  first 
meeting  within  its  borders. 

i  Supra,  §  72. 

CLEPII. Bus. CORP. — 9  (129) 


§  139  BUSINESS   CORPORATIONS.  (Ch.  T 

§  139.     Proxies. 

An  important  distinction  must  be  noted  between  stockhold- 
ers and  directors  with  regard  to  their  right  to  vote  by  proxy. 
The  directors  are  the  trustees  for  the  stockholding  body,  and 
cannot  delegate  their  discretionary  powers  to  others.  Hence 
they  are  not  permitted  to  vote  by  proxy.2 

§  140.     Time  of  Holding  Meeting. 

The  same  particularity  should  be  observed  with  regard  to 
notice,  or  waiver  of  notice,  as  was  outlined  when  discussing 
the  holding  of  the  incorporators'  meeting.3  The  form  of  notice 
heretofore  inserted  for  the  first  meeting  of  the  incorporators  4 
can  readily  be  adapted  to  the  first  meeting  of  directors.  A  form 
of  waiver  in  general  use  is  the  following: 

§  141.     Waiver  of  Notice  of  First   Meeting  of  Board  of 
Directors. 

The  undersigned,  directors  of  the  Company,  a  cor- 
poration created  under  the  laws  of  the  state  of  ,  do 

hereby  call  the  first  meeting  of  the  directors  of  said  company  to  be 

held  at ,  in  the  city  of ,  on  the 

day  of ,  A.  D.  19. .,  at  the  hour  of o'clock 

in  the noon,  for  the  purpose  of  electing  officers  of  the  company, 

authorizing  the  issue  of  stock  either  for  cash  or  for  property,  author- 
izing the  purchase  of  property,  and  the  transaction  of  such  other 
business  as  the  board  may  deem  proper;  and  we  hereby  waive  all 
the  requirements  of  law  and  the  by-laws  of  the  company  as  to  notice 
of  time,  place,  and  object  of  such  meeting,  and  consent  to  the  trans- 
action thereat  of  any  and  all  business  pertaining  to  the  company's 
affairs. 

In  testimony  whereof  we  have  signed  these  presents  this 

day  of 19. ..  


2  Perry  v.  Oil  Co.,  93  Ala.  364,  9  South.  217 :    State  ex  rel.  Schroe- 
der  v.  Perkins,  90  Mo.  App.  603. 
s  Supra,  §§  89-90,  95-95d. 
*  Supra,  §  95b. 

(130) 


Cll.  7)  FIRST  MEETING  OP  DIRECTORS.      '  §  145 

PROCEEDINGS. 

§  142.     Organization. 

The  meeting  will  be  organized  in  a  manner  similar  to  that 
of  the  incorporators'  meeting.5  It  is  well  to  have  the  minutes 
show  who  were  present,  but  the  question  of  stock  representa- 
tion, of  course,  does  not  enter  into  the  directors'  meeting.  A 
majority  of  the  directors  constitute  a  quorum,  unless  some  dif- 
ferent rule  is  prescribed  by  law,  charter,  or  by-laws.6 

§  143.     Minutes  of  Incorporators'  Meeting. 

In  order  that  the  directors  may  know  what  work  has  been 
committed  to  them  by  the  stockholders,  it  is  well  to  read  the 
minutes  of  the  incorporators'  meeting. 

§  144.     Election  of  Officers. 

The  election  of  officers  would  next  be  in  order,  together  with 
a  resolution  fixing  their  salaries,  if  the  salaries  have  not  al- 
ready been  fixed  by  the  stockholders  or  in  the  by-laws. 

§  144a.     Secretary's  Oath. 

If  the  secretary  should  be  ordered  to  take  an  oath  of  office, 
as  is  in  certain  places  customary,  and  as  is  required  in  New 
Jersey,7  the  oath  will  then  be  administered  to  him.  The  fol- 
lowing form  of  oath  would  be  proper: 

§  145.     Form  of  Secretary's  Oath. 
State  of ) 

v.  SS  * 

County  of j 

secretary  of  the  Company,  a  corpora- 
tion created  and  existing  by  virtue  of  the  laws  of  the  state  of 

s  Supra,  §§  97-100. 

«  10  Cyc.  776,  and  cases  cited ;   2  Cook,  Corp.  bot.  p.  1751 ;   3  Clark 
£  M.  Corp.  P-  2085 :    Wells  v.  Rubber  Co.,  19  N.  J.  Eq.  402. 
~  N.  J.  G.  C.  L.  §  13. 

(1311 


§  146  BUSINESS    CORPORATIONS.  (Ch.  7 

,  being  by  me  duly  sworn,  deposes  and  says  that  he  will 

faithfully  discharge  his  duties  as  secretary  of  said  company  to  the 

best  of  his  ability.  

Subscribed  and  sworn  to  before  me  this day  of , 

A.  D.  19...  

[Notarial  Seal.]  Notary  Public. 

§  146.     Treasurer's  Bond. 

The  form  of  treasurer's  bond,  if  any  is  required,  should  be 
passed  upon,  and,  if  the  bond  is  ready  for  delivery,  the  suffi- 
ciency of  the  proposed  sureties  should  be  approved  by  a  resolu- 
tion to  that  effect.  If  a  surety  company  is  offered  as  security, 
its  stereotyped  form  of  bond  for  such  cases  will  generally  be 
insisted  upon  by  it.  Counsel  for  the  corporation  should  careful- 
ly scrutinize  the  form,  inasmuch  as  stipulations  may  be  con- 
tained in  it  which  might  be  prejudicial  to  the  rights  of  the 
corporation.  The  ordinary  bond,  with  individual  security,  is 
in  the  following  or  equivalent  form : 

§  147.     Form  of  Treasurer's  Bond. 

Know  all  men  by  these  presents,  that  we, ,  of , 

as  principal,  and ,  of ,  as  surety,  are  held 

and  firmly  bound  unto  the Company,  a  corporation  duly 

created  and  existing  under  the  laws  of  the  state  of  , 

and  its  successors  and  assigns,  in  the  penal  sum  of  $ ,  to 

be  paid  to  said Company,  its  certain  attorney,  succes- 
sors or  assigns,  for  which  payment  well  and  truly  to  be  made  we  bind 
ourselves  and  each  of  us. 

In  testimony  whereof,  we  have  hereunto  signed  our  names  and 
affixed  our  seals  this day  of ,  A.  D.  19 ... 

Whereas,  the  above-bounden  has  been  elected  treas- 
urer of  the  said  Company,  and  is  about  to  enter  upon 

the  duties  of  his  office  as  such: 

Now.  therefore,  the  condition  of  this  obligation  is  such  that  if  the 

above-bounden shall  in  all  respects  fully  and  faithfully 

discharge  his  duties  as  sxich  treasurer  so  long  as  he  shall  occupy 
or  hold  said  office,  whether  during  the  continuance  of  the  term  for 
which  he  was  originally  elected  or  after  to  the  expiration  thereof, 
and  shall  properly  and  faithfully  account  to  the  said  company, 
and  its  successors  or  assigns,  for  any  and  all  money,  property. 
(132) 


Ch.  ?)  FIRST    MEETING   OF    DIRECTORS.  §  149a 

and  chattels  of  any  kind  whatsoever  for  or  with  which  the  said 

may  be  in  any  wise  accountable  to  the  said  company, 

and  also  if,  in  the  event  of  his  death,  resignation,  disqualification,  or 
removal  from  office  for  any  cause,  all  the  books,  papers,  accounts, 
money,  and  other  property  of  any  kind  whatsoever  in  his  possession, 
belonging  to  or  relating  to  the  affairs  of  said  company,  shall  be  forth- 
with turned  over  to  the  said  company,  then  the  above  obligation  is  to 
be  void ;  otherwise  to  be  and  remain  in  full  force  and  effect. 

[Seal.] 

[Seal.] 

Signed,  sealed,  and  delivered  in  the  presence  of 


§  148.     Election  of  Executive  Committee. 

If  executive  committee  is  authorized  in  the  charter  or 
by-laws,  and  the  officers  composing  the  same  have  not  been 
designated,  they  should  now  be  elected. 

§  149.     Exchanging  Stock  for  Property. 

If  the  stockholders  have  authorized  the  board  to  accept  a 
proposition  to  receive  property  in  return  for  the  issue  of  stock, 
this  proposition  should  be  considered,  and  action  taken  upon 
it.  If  the  sense  of  the  board  is  favorable  to  its  acceptance,  the 
proper  officers  should  be  authorized  to  execute  the  necessary 
papers  and  issue  the  stock  agreed  to  be  paid.  The  resolu- 
tion should  definitely  recite  that,  in  the  judgment  of  the 
board  of  directors,  the  property  is  of  a  value  equal  to  that 
of  the  stock  which  is  issued  in  payment  for  it.8 

§  149a.     Increasing  Stock. 

A  resolution  will  also  be  in  order,  in  accordance  with  the 
authority  previously  given  by  the  stockholders,8  increasing  the 
stock  beyond  the  amount  named  in  the  charter  as  that  with 
which  the  company  is  to  commence  business,  to  such  amount 

»  Supra,  §  18. 

(133) 


§  150  BUSINESS   CORPORATIONS.  (Ch.  7 

as  may  be  desired,  and,  if  deemed  proper,  assessing  the  stock 
already  subscribed  for  100  per  cent. 

§  150.     Fixing  Form  of  Stock  Certificate. 

Inasmuch  as  the  directors,  and  not  the  stockholders,  are  the 
governing  body  of  the  corporation,  although  it  has  been  found 
expedient  to  have  the  stockholders  pass  upon  the  form  of  stock 
certificate,  it  is  wiser  to  have  the  action  of  the  stockholders  in 
this  regard  ratified  and  approved  by  the  directors. 

§  151.     Designating  Bank. 

The  bank  in  which  the  treasurer  is  to  keep  his  deposit 
should  be  designated  by  the  board  of  directors.  If  this  is  not 
done,  the  treasurer  would  have  authority  to  open  an  account 
in  any  event.  But  many  reasons  of  policy  and  a  considerable 
degree  of  responsibility  enter  into  the  selection  of  the  prcp- 
er  bank.  It  is  therefore  more  to  the  interest  of  both  directors 
and  treasurer  that  the  board  should  determine  what  the  de- 
pository is  to  be.  The  proper  form  of  resolution  can  generally 
be  obtained  from  the  bank  where  the  deposit  is  to  be  made. 
It  should  designate  who  are  authorized  to  draw  checks. 

§  152.     Establishing  Office,  Etc. 

The  office  of  the  company  in  the  place  where  the  business 
is  to  be  transacted  should  be  fixed  upon  at  this  meeting. 
Where  the  statutory  agent  upon  whom  process  is  to  be  served, 
and  who  is  to  maintain  the  principal  office  of  the  corporation 
in  the  parent  state,  is,  under  the  laws  or  custom,  to  be  desig- 
nated by  the  directors,  this  designation  should  be  made  by 
formal  resolution  at  this  meeting. 

§  153.     Powers  of  Attorney,  Etc. 

Where  the  corporation  expects  to  do  business  in  other  states, 
the  statutes  of  these  states  should  be  consulted,  to  ascertain 
the  conditions  upon  which  foreign  corporations  are  permit- 
(134) 


Ch.  7)  FIRST    MEETING   OF    DIRECTORS.  §  156a 

ted  to  exercise  their  functions  in  such  jurisdictions.  Frequent- 
ly certain  powers  of  attorney,  statements,  etc.,  must  be  filed 
in  whatever  state  the  corporation  is  to  conduct  its  affairs. 
These  powers  of  attorney  and  statements  should  be  author- 
ized by  the  board. 

§  154.     Reports,  Etc. 

The  proper  officers  should  also  be  empowered  to  file  in  the 
parent  state  the  required  report,  stating  the  names  of  officers 
and  directors,  the  amount  of  capital  stock,  etc.,  as  required  by 
statute;  also  all  other  statements,  reports,  etc.,  required  to  be 
filed  anywhere. 

§  155.     Authorizing  Payment,  Etc. 

It  is  customary  to  pass  a  resolution  authorizing  the  proper 
officers  to  procure  the  necessary  books,  etc.,  for  the  use  of 
the  company,  and  to  pay  all  bills  incurred  in  its  organization. 

§  156.     Directors'    Functions    Distinguished    from    Stock- 
holders'. 

It  is  to  be  observed  that  the  stockholders'  authority  is,  as  a 
rule,  confined  to  authorising  the  directors  to  act.  The  directors 
do  not  merely  authorize  the  performance  of  any  act,  but  direct 
it  to  be  done.9  Hence  the  stockholders'  meeting  will  often  au- 
thorize the  same  act  that  the  directors'  meeting  subsequently 
directs  the  proper  officers  to  perform. 

§  156a.  Any  other  matter  of  business  as  to  which  the  board 
desires  to  give  definite  instructions  to  the  officers  should  be 
transacted  at  this  meeting  and  entered  upon  the  minutes.  The 
officers  should  see,  for  their  own  protection,  that  all  important 
matters  of  policy  are  considered  and  determined  by  the  board 
of  directors  before  they  themselves  venture  to  take  action  with 
respect  to  them. 

»  See  2  Cook,  Corp.  §§  708,  709 ;    Dill,  N.  J.  Corp.  28,  29. 

(135) 


§  157  BUSINESS   CORPORATIONS.  (Ch.  7 

§  157.     Minutes. 

The  following  may  be  considered  a  safe  form  of  minutes  for 
this  meeting : 

MINUTES  OF  FIRST  MEETING  OF  DIRECTORS. 
(To  be  varied  to  suit  the  circumstances  of  each  case.) 

The  first  meeting  of  the  directors  of  the  Company 

was  held  at ,  in  the  city  of ,  on  the 

day  of ,  A.  D.  19. .,  at  the  hour  of o'clock 

in  the  noon,  pursuant  to  notice  (or  pursuant  to  the  waivers 

appended  hereto).  The  meeting  was  called  to  order  by  Mr , 

who  called  for  nominations  for  the  office  of  chairman.  Mr 

was  duly  nominated  and  elected  to  this  office.  He  having 

assumed  the  chair,  nominations  for  secretary  were  called  for,  pur- 
suant to  which  Mr was  nominated  and  elected  to  that 

position,  and  assumed  the  duties  thereof. 

The  following  directors  were  present,  constituting  a  quorum  of 
the  board:  (Insert  names  of  directors  present.) 

The  call  (or  waiver  of  notice)  pursuant  to  which  the  meeting  was 
convened  was  then  read  and  ordered  spread  upon  the  minutes,  and 
is  in  the  words  and  figures  appended  hereto. 

The  minutes  of  the  first  meeting  of  the  incorporators  and  sub- 
scribers to  the  capital  stock  were  read. 

The  election  of  officers  was  next  proceeded  with,  resulting  in  the 
choice  of  the  following  gentlemen  to  serve  as  officers  of  the  company 
for  the  first  year  of  its  existence,  and  until  their  successors  are 
elected  and  qualified:  President  (insert  name) ;  vice  president  (in- 
sert name) ;  secretary  (insert  name) ;  treasurer  (insert  name). 

The  salaries  of  these  officers  were  fixed  at  the  following  sums, 
to  take  effect  (fill  in  date  from  which  salaries  are  to  commence): 

President,  $ per  annum ;  vice  president,  $ 

per  annum  ;  secretary,  $ per  annum  ;  treasurer,  $ 

per  annum. 

(Note. — In  case  any  of  these  officers  are  directors,  as  they  usually 
are,  it  is  well  to  have  the  minutes  recite  that,  during  the  discussion 
upon  the  amount  of  salary  to  be  voted  to  each  officer,  the  officer 
whose  salary  was  being  considered  was  absent  from  the  room  and 
took  no  part  in  the  discussion.) 

The  president  thereupon  assumed  the  chair. 

The  secretary  then,  pursuant  to  the  motion  of  Mr 

took  the  written  oath  in  the  form  appended  to  these  minutes,  and 
entered  upon  the  discharge  of  his  duties. 

It  was  moved  by  Mr that  the  treasurer  of  the  com- 

(136) 


Cll.  7)  FIRST    MEETING    OF    DIRECTORS.  §  157 

pany  be  required  to  give  bond  in  the  sum  of  $ for  the 

faithful  performance  of  his  duties.  This  motion,  being  seconded, 
was  unanimously  carried.  The  treasurer  thereupon  presented  a 

bond  signed  by  himself  as  principal,  and  by  as  surety, 

which  was  approved,  as  to  form,  execution,  and  the  sufficiency  of 
the  sureties,  by  the  board,  and  the  form  of  same  ordered  spread 
upon  the  minutes. 

The  following  gentlemen  were  then  elected  to  constitute  the  ex- 
ecutive committee  for  the  first  year  of  the  company's  existence,  and 
until  their  successors  are  elected  and  qualified,  to  wit:  (Insert 
names.) 

( Note. — The  above  paragraph  is  only  to  be  inserted  where  the  mem- 
bers of  the  executive  committee  have  not  been  previously  designated 
in  the  charter  or  by-laws,  or  by  the  stockholders  when  they  are 
empowered  to  select  the  committee.) 

On  motion  of  Mr ,  the  following  preamble  and  reso- 
lutions were  unanimously  adopted : 

Whereas,  a  proposition  has  been  received  from ,  offer- 
ing to  sell,  transfer,  and  assign  to  this  company  the  following  de- 
scribed property  (insert  description) ;  the  said  property  to  be  paid 
for  by  full-paid  and  nonassessable  stock  of  this  company,  of  the  par 

value  of  one  hundred  thousand  dollars,  to  be  issued  to  

and  his  assigns ;  offering,  also,  in  case  of  the  acceptance  of  said 
proposition,  to  donate  to  the  treasury  of  the  company  twenty-five 
thousand  dollars  of  the  stock  at  par  to  be  issued  in  payment  as 
aforesaid ;  and 

Whereas,  by  an  agreement  entered  into  between  the  individual  in- 

corporators  of  this  company  and  said ,  the  stock  to  be 

issued  in  payment  as  aforesaid  is  to  include  the  stock  subscribed  for 
by  said  incorporators ;  and 

Whereas,  the  incorporators  and  subscribers  to  the  capital  stock  of 

this  company,  in  meeting  assembled  on  the   day  of 

,  19. .,  passed  a  resolution  reciting  that,  in  their  judg- 
ment, the  said  proposition  was  fair  and  reasonable,  and  that  the 
value  of  the  property  offered  was  equal  to  that  of  the  stock  pro- 
posed to  be  taken  in  payment  therefor,  and  that  such  property  was 
necessary  to  enable  the  company  to  properly  conduct  its  affairs,  and 
authorizing  and  requesting  this  board,  if,  in  their  judgment,  it  is 
proper  so  to  do,  to  accept  said  proposition  and  purchase  the  property 
above  mentioned  upon  the  terms  thereof,  and  to  issue  stock  in  pay- 
ment in  accordance  with  said  proposition,  and  designating 

and  to  receive  and  hold  the  twenty-five  thousand  dol- 
lars of  stock  at  par  to  be  donated  to  this  company  as  therein  re- 
cited, in  accordance  with  the  instructions  which  shall  from  time  to 
time  be  given  them  by  this  board :  and 

(137) 


§  157  BUSINESS   CORPORATIONS.  (Ch.  T 

Whereas,  in  the  judgment  of  this  board  the  said  property  is  of  the 
fair  value  of  one  hundred  thousand  dollars,  and  the  same  is  neces- 
sary to  enable  the  company  to  properly  conduct  its  affairs,  and  the 
said  proposition  should  be  accepted : 

Now,  therefore,  be  it  resolved  that  the  said  proposition  be,  and  is 
hereby,  accepted ;  and  the  proper  officers  of  this  company  are  hereby 
empowered  and  directed  to  receive  the  duly  executed  transfers  and 
assignments  of  said  property,  and  to  issue  in  exchange  therefor  cer- 
tificates of  the  capital  stock  of  this  company  to  the  par  value  of  one 
hundred  thousand  dollars,  full-paid  and  nonassessable,  in  the  name 

of or  of  such  persons  as  he  may  designate  in  writing 

to  receive  the  same; 

And  be  it  further  resolved  that  an  assessment  of  100  per  cent, 
be  levied  upon  the  shares  of  stock  subscribed  by  the  incorporators, 
and  that  the  company  accept  in  payment  of  said  subscriptions  and 
assessment  the  property  embraced  within  the  proposition  aforesaid ; 

And  be  it  further  resolved  that  said and 

are  authorized  to  receive  and  hold  the  twenty-five  thousand  dollars 
of  stock  at  par  to  be  donated  to  this  company  under  the  terms  of 
said  proposition,  and  directed  to  hold  the  same  until  the  further 
order  of  this  board. 

(Note. — If  the  proposition  referred  to  in  the  foregoing  paragraphs 
does  not  include  the  incorporators'  stock,  specific  authority  should 
be  given  to  the  officers  to  issue  the  stock  to  the  incorporators.) 

Upon  motion  of  Mr ,  it  was  unanimously  resolved 

that  the  proper  officers  of  this  company  be,  and  they  are  hereby, 
authorized  to  sell  for  cash,  at  par,  one  hundred  thousand  dollars  of 
the  capital  stock  of  this  company,  in  addition  to  the  amount  named 
in  the  charter  as  that  with  which  the  company  shall  commence  busi- 
ness. 

The  form  of  stock  certificates  approved  and  adopted  at  the  initial 
meeting  of  incorporators  and  subscribers  to  the  stock  was  presented, 
and  the  action  of  said  meeting  in  that  regard  ratified  and  approved. 

On  motion  of  Mr ,  the  following  resolution  was  unan- 
imously adopted: 

Resolved,  that  the  treasurer  of  this  company  be,  and  he  is  hereby, 
author'zed  and  directed  to  open  and  keep  an  account,  both  for  de- 
posit and  discount,  with  the Bank  in  the  name  of  and 

for  the  benefit  of  this  company,  and  to  deposit  in  such  bank  to  its 
credit  from  time  to  time  any  and  all  moneys,  checks,  drafts,  notes, 
acceptances,  or  other  evidences  of  indebtedness  which  may  now  be 
in  his  possession  or  may  hereafter  come  into  his  custody,  and,  in 
the  name  of  this  company,  to  withdraw  the  same,  or  any  part  of 
the  proceeds  thereof,  by  checks  signed  by  both  the  president  and 
treasurer  of  this  company,  and  to  pledge  the  credit  of  this  company 


Cll.  7)  FIRST   MEETING   OP    DIRECTORS.  §  158 

as  the  said  president  and  treasurer  may  from  time  to  time  find 
necessary  or  convenient,  by  means  of  evidences  of  indebtedness  sign- 
ed by  the  two  said  officers,  and  for  these  and  all  other  purposes  to 
sign,  indorse,  accept,  make,  execute,  and  deliver  any  and  all  checks, 
notes,  drafts,  and  bills  of  exchange. 

On  motion  of  Mr ,  it  was  resolved  that  an  office  of 

the  company  be  established  and  maintained  at  (insert  name  of  place 
where  the  company  proposes  to  conduct  its  business),  where  meet- 
ings of  the  board  of  directors  may  from  time  to  time  be  held;  the 
passage  of  this  resolution,  however,  not  to  prevent  the  holding  of 
such  meetings  in  the  parent  state  or  elsewhere  as  may  be  deter- 
mined by  the  board  of  directors. 

Upon  motion  of  Mr ,  It  was  resolved  that  the  proper 

officers  of  this  company  be,  and  they  are  hereby,  empowered  and 
directed  to  execute  on  its  behalf,  in  such  form  as  may  be  required 
by  law,  and  to  acknowledge  and  file,  the  certificate  or  statement  re- 
quired by  statute  to  be  filed  in  any  jurisdiction  in  which  it  may  be 
found  necessary  to  file  such  certificate  or  statement  in  order  to 'au- 
thorize the  company  to  transact  business  therein. 

On  motion  of  Mr ,  the  secretary  was  instructed  to 

have  prepared,  and  the  proper  officers  authorized  and  directed  to 
execute,  acknowledge,  and  file  with  the  proper  state  officials  in  the 
state  of  (insert  name  of  parent  state),  all  such  statements  and  re- 
ports as  may  be  required  to  be  filed  by  any  law,  regulation,  or  cus- 
tom in  said  state. 

On  motion  of  Mr ,  the  secretary  was  instructed  to 

procure  the  proper  books,  stationery,  and  office  facilities  for  the 
orderly  conduct  of  the  business  of  the  company. 

On  motion  of  Mr ,  the  treasurer  was  authorized  and 

instructed  to  pay  from  the  funds  of  the  company  the  expense  prop- 
erly incurred  in  connection  with  the  incorporation  and  organization 
of  this  company. 

The  secretary  was  instructed  to  insert  in  the  minute  book,  for 
convenience  of  reference,  copies  of  the  following: 

(1)  Waiver  of  notice  of  this  meeting  (copied  at  page ). 

(2)  Secretary's  oath  (copied  at  page ). 

(3)  Treasurer's  bond  (copied  at  page ). 

(4)  Report  to  secretary  of  state  (copied  at  page ). 

There  being  no  further  business,  the  meeting  then  adjourned. 


Secretary. 
§  158.     Meeting  of  Executive  Committee. 

Where  there  is  an  executive  committee,  the  procedure  at  its 
meetings  may  be  modeled  after  that  of  the  directors. 

(139) 


159  BUSINESS    CORPORATIONS.  (Ch.  8 


CHAPTER 

STOCK. 

§  139.     Definitions. 

160.  Common   Stock. 

161.  Preferred  Stock. 

162.  Guarantied  Stock. 

163.  Founders'  Shares. 

164.  Deferred  Stock. 

165.  Overissued  Stock. 

166.  Special  Stock. 

167.  Full-Paid  Stock. 

168.  Issued  and  Outstanding  Stock. 

169.  Unissued  Stock. 

170.  Treasury   Stock. 

171.  Watered   Stock. 

172.  Preferred  Stock. 

172a.  Principles    Governing. 

173.  Stating  Preferences. 

174.  Classes  of  Preferences. 

175.  Cumulative  Dividends. 

176.  Preferences  upon  Dissolution. 

177.  Conversion  into  Bonds. 

178.  Forms. 

178a.          Common  Stock. 
178b.          Preferred  Stock. 

179.  Signature. 

180.  Registrar. 

181.  Liability  of. 

183.  Selling  for  Less  than  Par. 

184.  When   Certificates  Issued. 

185.  Certificates  for  Partial  Payment 

187.  Assignment  of  Installment  Certificate. 
187a.  Remedy  for  Nonpayment  of  Assessments. 

188.  Stubs. 

189.  Transfer  of  Stock. 

190.  Precautions  to  be  Taken. 

191.  Identity  of  Holder. 

192.  Eights  of  Holder  to  Transfer. 


(140) 


Ch.  8)  STOCK.  §  162 

193.  Transfer  of  Stock— Rights  of  Third  Persons. 
193a.          Form  of  Certificate  to  Trustee. 

194.  Rights  of  Trustee  to  Transfer. 

195.  Rights  of  Executor  to  Transfer. 

196.  Liability  for  Illegal  Transfer. 

197.  Jurisdiction  of  Court. 

198.  Appeal  Pending. 

199.  Assignment  by  Joint  Owners. 

200.  Negotiability  of  Stock. 

201.  Lost  Certificates. 
201  a.          Indemnity  Bond. 

202.  Form  of  Indemnity  Bond. 


§  159.     Definitions. 

The  issue  of  stock  is  next  to  be  considered.  In  order  that 
there  may  be  a  complete  understanding  of  the  terms  in  or- 
dinary use  to  designate  the  different  classes  of  stock,  certain 
definitions  may  not  be  amiss  at  this  point. 

§  160.  Common  Stock  is  that  stock  "which  entitles  the 
owners  of  it  to  an  equal  pro  rata  division  of  profits,  if  any 
there  be ;  one  stockholder  or  class  of  stockholders  having  no 
advantage,  priority,  or  preference  over  any  other  shareholder 
or  class  of  stockholders  in  the  division."  1 

§  161.  Preferred  Stock  is  stock  which  entitles  the  holder 
to  certain  privileges,  the  nature  of  which  will  be  treated  more 
fully  hereafter.2 

§  162.  Guarantied  Stock  is  a  term  loosely  applied  to  several 
classes  of  preferred  stock :  First,  stock,  the  dividends  upon 
which  are  guarantied  by  another  corporation;  second,  prefer- 
red stock,  the  dividends  upon  which  are  cumulative  simply ; 
third,  preferred  stock,  the  interest  and  principal  of  which  the 
company  guaranties  and  agrees  to  liquidate  at  par  at  a  date 
named,  in  which  case  the  certificates  become  practically  inter- 

i  1  Cook.  Corp.  §  12.  *  Infra,  §§  172-177. 

(141) 


§  163  BUSI1S7ESS    CORPORATIONS.  (Cll.  8 

est-bearing  bonds.8  This  class  of  stock  is  sometimes  issued 
for  the  purchase  of  property.  Indeed,  the  nature  of  a  guaranty 
may  assume  a  great  number  of  different  shapes. 

§  163.  Founders'  Shares  are  in  more  common  use  In 
England  than  in  the  United  States.  This  is  a  class  of  stock 
the  holders  of  which  are  entitled  to  the  surplus  profits  of  the 
company,  or  a  certain  percentage  thereof,  which  shall  remain 
after  paying  the  dividends  at  a  fixed  rate  on  both  preferred 
and  common  stock,  whenever  it  may  be  determined  to  divide 
such  surplus  profits.4 

§  164.  Deferred  Stock  is  stock  the  payment  of  dividends 
upon  which  is  expressly  postponed  until  some  other  class  of 
stockholders  is  paid  a  dividend,  or  until  some  certain  obliga- 
tion or  liability  of  the  corporation  is  satisfied.5 

§  165.  Overissued  Stock  is  stock  "issued  in  excess  of 
the  full  amount  of  capital  stock  authorized  by  the  charter  of 
the  corporation.  Such  stock  is  void,  even  though  issued 
in  good  faith."  • 

§  166.  Special  Stock  is  a  peculiar  kind  of  stock  known 
only,  it  is  believed,  in  Massachusetts.  "Its  characteristics  are 
that  it  is  limited  in  amount  to  two-fifths  of  the  actual  capital ; 
it  is  subject  to  redemption  by  the  corporation  at  par  after  a 
fixed  time,  to  be  specified  in  the  certificate;  the  corporation 
is  bound  to  pay  a  fixed  half-yearly  sum  or  dividend  upon  it  as' 
a  debt;  the  holders  of  it  are  in  no  event  liable  for  the  debts 
of  the  corporation  beyond  the  amount  of  their  stock;  and  the 
issue  of  special  stock  makes  all  the  general  stockholders  liable 
for  all  debts  and  contracts  of  the  corporation  until  the  special 
stock  is  fully  redeemed."  7 

§  167.  Full-Paid  Stock  is  stock  for  which  payment  in 
full  has  been  made  either  in  cash,  property,  or  services,  in 
good  faith  and  without  fraud. 

s  10  Cyc.  574.  •  Id. 

*  Dill,  N.  J.  Corp.  359.  T  Id. 

s  1  Cook,  Corp.  §  12. 

(142) 


Ch.  8)  STOCK.  §  172a 

§  168.  Issued  and  Outstanding  Stock  is  that  which  has 
been  bought  and  fully  paid  for,  and  to  which  somebody  other 
than  the  corporation  itself  is  entitled  without  further  consider- 
ation. 

§  169.  Unissued  Stock  is  stock  the  issue  of  which  has 
been  authorized,  but  rights  in  which  no  person  has  yet  acquired. 

§  170.  Treasury  Stock  is  stock  which  has  once  been  issued 
as  full  paid  and  nonassessable,  and  which  has  come  back  into 
the  possession  of  the  company  by  donation  or  otherwise.  It 
can  then  be  sold  below  par,  if  deemed  desirable.8 

§  171.  Watered  Stock  is  stock  issued  or  authorized  by 
the  corporation  to  be  issued  without  an  asset  behind  it  for  its 
full  value. 

§  172.     Preferred  Stock. 

The  principles  governing  this  class  of  stock  have  been  stat- 
ed so  succinctly  by  the  vice-chancellor  of  the  state  of  New 
Jersey  in  the  case  of  Elkins  v.  Camden  &  A.  R.  Co.,  36  N.  J 
Eq.  233,  236,  that  the  following  extracts  from  his  opinion  are 
here  quoted  in  full. 

§  172a.     Principles  Governing. 

"There  are  certain  legal  principles  pertinent  to  this  discus- 
sion which  I  think  are  so  firmly  established  that  they  may  be 
taken  for  granted,  without  argument  or  the  citation  of  au- 
thorities: First,  stockholders  are  not  creditors,  and  until  the 
winding  up  of  the  corporation  are  entitled  to  nothing  from  it 
but  a  distribution  of  its  net  earnings;  second,  dividends  can 
only  be  paid  out  of  profits ;  third,  calling  stock  preferred  stock 
does  not,  per  se,  define  the  rights  of  such  stock,  but  in  order 
to  determine  in  what  respect  the  holder  of  such  stock  is  to 
be  preferred  to  the  holder  of  ordinary  stock  resort  must  be  had 
to  the  statute  or  contract  under  which  it  is  issued ;  and,  fourth, 
where  the  statute  or  contract  under  which  preferred  stock  is 

«  Supra,  §  116,  and  note. 

(143) 


§  173  BUSINESS    CORPORATIONS.  (Ch.  8 

issued  declares  or  promises  that  the  holder  of  such  stock  shall 
receive  a  dividend  of  a  fixed  and  certain  rate  per  annum, 
without  limiting  the  annual  sum  to  be  paid  as  a  dividend  to 
profits  earned  or  made  within  a  designated  period,  as,  for  ex- 
ample, that  he  should  receive  a  dividend  of  7  per  cent,  per  an- 
num before  any  dividend  shall  be  paid  on  the  ordinary  stock, 
there  the  preferred  stockholder  is  entitled  to  7  per  cent, 
per  annum  from  the  date  of  the  issuing  of  the  stock  held 
by  him,  whether  profits  sufficient  to  pay  him  each  year  are, 
made  or  not ;  and  if,  at  the  first  division  of  profits,  suffi- 
cient shall  not  have  been  made  to  pay  him  the  whole  sum  due. 
he  may  carry  the  arrears  due  him  over  to  the  next  dividend, 
and  continue  to  do  so  until  he  has  received  the  whole  sum  due 
him,  calculated  at  7  per  cent,  per  annum  from  the  date  of  the 
issue  of  the  stock  held  by  him." 

§  173.     Stating  Preferences. 

Preferred  stock  may  entitle  the  holder  to  such  preferences 
as  may  be  specified,  either  as  to  drawing  dividends,  preferential 
voting  powers,  privileges  upon  dissolution,  or  what  not.  Some- 
times the  certificates  of  stock  are  issued  and  marked  "Pre- 
ferred" without  the  preferences  appearing  upon  their  face. 
Unless  there  is  some  statute,  charter  provision,  by-law,  or 
resolution  to  which  the  purchaser  of  this  stock  can  resort  to 
ascertain  his  rights,  the  preference  is  meaningless.  Two  or 
more  classes  of  preferred  stock  may  be  created  by  the  same 
corporation,  each  drawing  a  different  percentage  of  dividend, 
one  class  to  draw  the  entire  dividend  limited  before  the  other 
draws  anything.  Inasmuch  as  the  different  classes  of  pref- 
erences may  be  numberless,  great  care  should  Be  taken  in  ex- 
plicitly defining  the  rights  of  the  holders  of  this  kind  of  st^ck. 
and  these  rights  should  be  recited  in  the  certificate  itself.9 
Frequently  the  holders  of  preferred  stock  are  deprived  of  the 
voting  power,  a  wise  precaution  in  certain  cases,  but  one  which 
may  materially  interfere  with  the  saleability  of  the  stock. 

»  Dill.  X.  J.  Corp.  42. 
(144) 


Ch.  8)  STOCK.  §  177 

§  174.     Classes  of  Preferences. 

In  general,  there  may  be  said  to  be  three  classes  of  preferred 
stock  with  regard  to  dividends :  First,  the  preferred  stock  may 
draw  dividends  at  the  rate  stated,  the  common  stock  receiving 
the  entire  balance  of  the  dividends  declared  during  the  year, 
in  which  case  the  common  stock  is  sometimes  more  valuable 
than  the  preferred  stock;  second,  the  preferred  stock  may  re- 
ceive dividends  at  the  rate  stated,  then  the  common  stock  re- 
ceive dividends  at  the  same  rate,  after  which  all  other  funds  set 
aside  for  dividends  are  to  be  divided  equally  between  the  two 
classes  of  stock;  third,  the  preferred  stock  may  receive  divi- 
dends at  the  rate  stated,  and  then  share  equally  with  the  com- 
mon stock  in  all  other  funds  set  aside  for  dividends. 

§  175.     Cumulative  Dividends. 

If  the  dividends  are  to  be  cumulative,  they  should  be  so 
stated.10 

§  176.     Preferences  upon  Dissolution. 

The  preferred  stockholders  may  or  may  not  receive  prefer- 
ences upon  the  dissolution  of  the  company,  and  they  may  or 
may  not  receive  special  voting  privileges.11 

§  177.     Conversion  into  Bonds. 

Sometimes  provision  is  made  for  converting  preferred  stock 
into  bonds,  or,  vice  versa,  converting  bonds  into  preferred 
stock.12  A  very  clear  discussion  of  the  principles  which  should 
govern  those  in  charge  of  corporate  affairs  in  determining 
whether  to  issue  preferred  stock  or  bonds  for  the  purpose  of 

1010  Cyc.  573.  and  note.  See,  also,  2  Clark  &  M.  Corp.  §  529; 
Elkins  v.  Railroad  Co.,  36  N.  J.  Eq.  233;  Staples  v.  Materials  Co. 
[1896]  2  Ch.  Div.  303. 

11  Dill,  N.  J.  Corp.  43. 

12  Id.  43,  44. 

CLEPH. Bus. CORP. — 10 


§  178  BUSINESS    CORPORATIONS.  (Ch.  8 

raising  money  will  be  found  in  chapter  13  of  the  admirable 
treatise  by  Prof.  Meade  on  "Trust  Finance."  1S 

§  178.     Forms. 

Forms  of  both  common  and  preferred  stock  are  here  ap- 
pended. 

§  178a.     Common  Stock. 

Number Shares. 

Par  Value  $ Each. 

The Company. 

Incorporated  under  the  Laws  of  the  State  of  

Preferred  Stock,  $ Common  Stock,  $ 

Full  Paid  and  Nonassessable. 

This  is  to  certify  that is  the  registered  owner  of 

shares  of  the  common  stock  of  this  company,  transferable  only  on 
the  books  of  the  company  by  the  said  owner  in  person  or  by  duly 
authorized  attorney  upon  surrender  of  this  certificate  properly  en- 
dorsed. 

Witness  the  seal  of  the  company  and  the  signatures  of  its  president 
and  secretary  this day  of  A.  D.  19. .. 


(Corporate  Seal.)  President 

Attest:  

Secretary. 

§  178b.     Preferred  Stock. 

Number Shares. 

Par  Value  $ Each. 

The Company. 

Incorporated  under  the  Laws  of  the  State  of 

Capital  Stock,  $ 

Preferred  Stock,  $ .  Common  Stock,  $ 

Full  Paid  and  Nonassessable. 

This  is  to  certify  that    is  the  registered  owner  of 

shares  of  the  preferred  capital  stock  of  the 

Company,   transferable  only  on   the  books  of  the  company  by  said 

is  Published  by  D.  Appleton  &  Co. 
(140) 


Ch.  8)  STOCK.  §  179 

owner  in  person,  or  by  his  duly  authorized  attorney,  upon  surrender 
of  this  certificate  properly  indorsed. 

This  stock  is  part  of  an  issue  amounting  in  all  to  $ par 

value,  authorized  by  the  certificate  of  incorporation  of  the  company 
filed  in  (insert  name  of  office  where  certificate  is  filed),  on  the 
day  of ,  A.  D.  19. .. 

The  owners  of  this  preferred  stock  are  entitled  to  receive  and  the 
company  is  bound  to  pay  out  of  its  surplus  or  net  earnings  a  divi- 
dend at  the  rate  of  but  never  exceeding per  cent,  per 

annum,  cumulative  from  and  after  the day  of , 

A.  D.  19. .,  payable  quarterly,  before  any  dividend  shall  be  set  apart 
or  paid  on  the  common  stock. 

This  preferred  stock  may,  by  vote  of  a  majority  of  the  board  of 

directors,  be  redeemed  at  any  time  after  three  years  from  the 

day  of  A.  D.  19..,  at  the  price  of  $ per  share 

and  any  accumulated  dividends.. 

In  case  of  liquidation  or  dissolution  or  distribution  of  the  assets 
of  this  company,  the  owners  of  this  preferred  stock  shall  be  paid 
the  par  value  of  their  preferred  shares,  and  the  amount  of  dividends 
accunnilated  and  unpaid  thereon,  before  any  amount  shall  be  dis- 
tributed among  the  owners  of  the  common  stock,  and  after  the  pay- 
ment of  the  par  value  of  the  common  stock  to  the  owners  thereof  the 
balance  of  the  assets  and  funds  shall  be  distributed  ratably  among  all 
the  stockholders  without  preference. 

Witness  the  seal  of  the  company  and  signatures  of  its  president 
and  secretary  this day  of ,  A.  D.  19. .. 


(Corporate  Seal.)  President 

Attest:  , 

Secretary. 

(Note. — The  above  form  of  certificate  of  preferred  stock  will  be 
varied  to  suit  the  particular  terms  of  preference.  Sometimes  the 
nature  and  extent  of  the  preferences  are  also  stated  in  the  certifi- 
cates for  common  stock.  This  is  a  convenient  method  of  notifying 
the  common  stock  holders  of  the  rights  which  take  precedence  over 
theirs.) 

§  179.     Signatures. 

The  certificates  are  generally  signed  by  the  president  and 
secretary  or  treasurer,  and  the  officers  who  should  sign  these 
certificates  are  usually  designated  by  the  laws  of  the  state  or 
in  the  by-laws  of  the  corporation.  Certificates  for  stock  should 

(147) 


'§  180  BUSINESS    CORPORATIONS.  (Ch.  8 

also  be  under  the  seal  of  the  corporation,14  although  the  omis- 
sion of  the  seal  will  not  render  the  stock  invalid.16 

§  180.     Registrar. 

The  certificates  of  stock  in  large  corporations  are  also  fre- 
quently signed  by  a  trust  company  as  registrar  and  transfer 
agent.  This  is  because  there  has  been  a  growing  public  de- 
mand for  some  guaranty  of  responsibility  in  the  issue  and  trans- 
fer of  stock.  Indeed,  the  New  York  Stock  Exchange  has  for 
many  years  past  refused  to  list  stock  of  any  corporation  whose 
certificates  have  not  been  registered  with  some  responsible 
trust  company  or  other  suitable  agency. 

§  181.     Liability  of  Registrar. 

It  has  been  quite  usual  for  these  trust  companies  to  en- 
deavor to  shirk  any  responsibility  for  an  illegal  issue  or  transfer 
by  claiming  the  right  to  merely  follow  without  inquiry  the  di- 
rections given  them  by  the  corporation  issuing  the  stock.  On 
the  other  hand,  the  corporations  themselves  have  sought  to 
avoid  responsibility  in  the  matter  by  claiming  to  rely  upon  the 
trust  company  to  exercise  care  and  judgment  before  issuing  the 
stock  or  making  the  transfer.  In  view  of  this  apparently  di- 
vided responsibility,  the  public  sometimes  suffers  more  than  if 
a  registered  agent  had  not  intervened  between  it  and  the 
corporation  whose  stock  is  in  question. 

§  182.  It  has  been  held  in  a  series  of  well-considered  cases 
that  where  the  registrar  fraudulently  and  criminally  permits 
an  overissue  of  stock  the  corporation  issuing  it  would  be 
liable  to  a  bona  fide  holder  for  value,  upon  the  ground  that 
the  registrar  was  the  agent  of  the  corporation,  and,  on  a 
familiar  principle  of  the  law  of  agency,  the  principal  would  be 
bound.16 

i*  Byers  v.  Rollins,  13  Colo.  22,  21  Pac.  894. 

is  Halstead  v.  Dodge,  1  How.  Prac.  (N.  S.)  170,  51  N.  Y.  Super. 
Ct.  169. 

16  New  York  &  N.  H.  R.  Co.  v.  Schuyler,  34  N.  Y.  30;   Fifth  Ave. 

(148) 


Ch.  8)  STOCK.  §  183 

§  182a.  Whether  the  trust  company  would  itself,  under 
these  circumstances,  be  liable  to  a  bona  fide  holder  for  value 
is  an  open  question,  and  one  upon  which  the  decisions  of  the 
court  have  not  thrown  much  light.  It  would  seem  that,  inas- 
much as  the  object  of  having  a  registrar  is  to  give  the  public 
an  additional  guaranty  of  the  regularity  of  the  issue  of  stock, 
if  the  registrar  signs  certificates  in  this  capacity,  knowing  that 
the  public  is  looking  to  it  to  see  that  the  requirements  of  the 
law  have  been  observed  in  its  issue,  it  should  be  held  liable 
for  neglect  in  the  performance  of  this  duty.17  Certainly  if  the 
word  "countersigned"  is  used  by  the  registrar  it  would  be  lia- 
ble, for  the  reason  that  "to  countersign  an  instrument  is  to  sign 
what  has  already  been  signed  by  a  superior,  to  authenticate 
by  the  additional  signature."  When,  therefore,  the  registrar 
countersigns  and  seals  a  certificate  of  stock,  and  puts  it  in  cir- 
culation, it  declares  in  the  most  formal  manner  that  the 
certificate  has  been  properly  executed  by  the  corporation,  and 
that  every  essential  requirement  of  law  and  of  the  by-laws 
has  been  carried  out  to  make  it  the  binding  act  of  the  com- 
pany.18 

§  183.     Shares  cannot  be  Sold  for  Less  than  Par. 

Unless  the  governing  statute  otherwise  provides,  a  corpora- 
tion cannot  issue  its  shares  in  the  first  instance  at  less  than  par. 
In  case  of  insolvency,  persons  who  purchase  their  shares  for 
less  than  par  will  be  obliged  to  make  up  to  the  creditors  the  dif- 
ference between  the  purchase  price  and  the  par  value.19  But 

Bank  v.  Railroad  Co.,  137  N.  Y.  231,  33  N.  E.  378,  19  L.  R.  A.  331,  33 
Am.  St.  Rep.  712 ;  Jarvis  v.  Beach  Co.,  148  N.  Y.  652,  43  N.  E.  68,  31 
L.  R.  A.  776,  51  Am.  St  Rep.  727.  See,  also,  Moores  v.  Bank,  111 
U.  S.  156,  4  Sup.  Ct.  345,  28  L.  Ed.  385. 

i-  Windram  v.  French,  151  Mass.  547,  24  N.  E.  914,  8  L.  R.  A.  750; 
Jarvis  v.  Beach  Co.,  148  N.  Y.  652,  43  N.  E.  68,  31  L.  R.  A.  776,  51 
Am.  St.  Rep.  727. 

is  Fifth  Ave.  Bank  v.  Railroad  Co.,  137  N.  Y.  231,  33  N.  E.  378,  19 
L.  R.  A.  331,  33  Am.  St.  Rep.  712. 

i»Ogilvie  v.  Insurance  Co.,  22  How.  (U.  S.)  380,  16  L.  Ed.  349; 

(149) 


§  184  BUSINESS    CORPORATIONS.  (Ch.  8 

the  Supreme  Court  of  the  United  States,  as  well  as  the  Court 
of  Appeals  of  the  State  of  New  York,  have  given  countenance 
to  the  doctrine  that  if  an  active  corporation  has  become  indebted 
to  such  an  extent  that  it  is  without  means  of  payment  except 
by  stock,  and  its  shares  have  actually  depreciated  in  value,  it 
may  pay  such  indebtedness  by  the  issue  of  stock  to  such  cred- 
itors at  the  actual  market  value ;  and,  if  it  decides  to  issue 
bonds  for  which  no  market  can  be  obtained  without  giving  as 
a  bonus  stock  in  the  company,  this  is  legal,  provided  the  par 
value  of  the  bonds  does  not  exceed  their  actual  value  plus 
the  actual  value  of  the  stock  issued  as  a  bonus.20 

§  184.     When  Stock  Certificates  may  be  Issued. 

Stock  should  not  be  issued  until  it  has  been  paid  for  in  full. 
Meanwhile  the  subscriber  is  entitled  to  receive  from  the  treas- 
urer or  secretary  a  receipt  for  the  payments  made,  which  re- 
ceipt may  be  transferable  if  so  desired. 


Upton  v.  Tribilcock,  91  U.  S.  45,  23  L.  Ed.  203 ;  Sanger  v.  Upton,  91 
U.  S.  56,  23  L.  Ed.  220 ;  Webster  v.  Upton,  91  U.  S.  65,  23  L.  Ed.  384 ; 
Chubb  v.  Upton,  95  U.  S.  665,  24  L.  Ed.  523 ;  Pullman  v.  Upton,  96 
U.  S.  328,  24  L.  Ed.  818 ;  Hawley  v.  Upton,  102  U.  S.  314,  26  L.  Ed. 
179;  Congress  &  Empire  Spring  Co.  v.  Knowlton,  103  U.  S.  49,  26 
L.  Ed.  347 ;  Scovill  v.  Thayer,  105  U.  S.  143,  26  L.  Ed.  968 ;  Coit  v. 
Amalgamating  Co.,  119  U.  S.  343,  7  Sup.  Ct  231,  30  L.  Ed.  420 ;  Bank 
of  Ft.  Madison  v.  Alden,  129  U.  S.  372,  9  Sup.  Ct  332,  32  L.  Ed.  725 ; 
Washburn  v.  Green,  133  U.  S.  30,  10  Sup.  Ct  280,  33  L.  Ed.  516; 
Clark  v.  Bever,  139  U.  S.  96,  11  Sup.  Ct.  468,  35  L.  Ed.  88 ;  Fogg  v. 
Blair,  139  U.  S.  118,  11  Sup.  Ct.  476,  35  L.  Ed.  104;  Handley  v. 
Stutz,  139  U.  S.  417,  11  Sup.  Ct.  530,  35  L.  Ed.  227 ;  Camden  v.  Stu- 
art, 144  U.  S.  104,  12  Sup.  Ct  585,  36  L.  Ed.  363 ;  Lloyd  v.  Preston, 
346  U.  S.  630,  13  Sup.  Ct  131,  36  L.  Ed.  1111 ;  Dickerman  v.  Trust 
Co.,  176  U.  S.  181,  20  Sup.  Ct  311,  44  L.  Ed.  423. 

20  Christensen  v.  Quintard,  55  Hun,  608,  8  N.  Y.  Supp.  400;  Hand- 
ley  v.  Stutz,  139  U.  S.  417,  11  Sup.  Ct.  530,  35  L.  Ed.  227;  Van  Cott 
v.  Van  Brunt,  82  N.  Y.  535 ;  Fogg  v.  Blair,  139  U.  S.  118,  11  Sup.  Ct. 
476,  35  L.  Ed.  104;  Clark  v.  Bever,  139  U.  S.  96,  11  Sup.  Ct  468,  35 
L.  Ed.  88. 
(150) 


Ch.  8)  STOCK.  §  187 

§  185.     The  following-  is  a  form  much  in  use : 

FORM  OF  INSTALLMENT  CERTIFICATE. 

Number 10  Shares. 

Par  Value  $100  Each. 

The  Company. 

Incorporated  Under  the  Laws  of  the  State  of 

Preferred  Stock,  $ Common  Stock,  $ 

$200.  New  York  City, ,1904. 

This  is  to  certify  that ,  who  is  a  subscriber  for  ten  shares 

of  the  preferred  capital  stock  of  the Company  at  par, 

has  paid  into  the  treasury  of  the  company  on  account  of  his  said 
subscription  $20  per  share.  Upon  payment  of  the  remaining  install- 
ments of  said  subscription  and  surrender  of  this  certificate,  accom- 
panied by  evidence  that  the  remaining  installments  of  said  subscrip- 
tion have  been  paid,  duly  executed  stock  certificates  for  said  ten 

shares  will  be  issued  to  the  said or  his  assigns. 

This  certificate  is  transferable,   and  all  the  rights  of  the  owner 
thereof  shall  pass  by  duly  executed  assignment  to  his  assignee. 


Secretary.  President. 

§  186.  As  further  payments  are  made  they  may  either  be 
indorsed  on  the  above  certificate,  or  be  evidenced  by  new  re- 
ceipts for  each  additional  payment.  On  the  back  of  these 
certificates  may  appear  the  following  form  of  transfer: 

§  187.     Assignment  of  Installment  Certificates. 

For  value  received  I  hereby  sell,  transfer,  and  assign  to , 

of ,  all  my  right,  title,  and  interest  in  and  to  the  shares 

of  stock  referred  to  in  the  within  certificate,  together  with  the  pay- 
ments made  thereon ;  and  I  do  hereby  authorize  and  direct  the 

proper  officers  of  the Company,  upon  payment  in  full 

being  made  for  said  shares  under  the  terms  of  my  subscription,  to 
issue  a  certificate  or  certificates  for  said  stock  to  the  order  of  my 
said  assignee.  

Dated  .'... 

Witness:    

(151) 


§  187a  BUSINESS  CORPORATIONS.  (Ch.  8 

§  187a.     Remedy  for  Nonpayment. 

At  common  law  the  remedy  of  the  corporation  against  a 
shareholder  who  defaults  upon  payments  for  his  stock  is  a  suit 
upon  his  subscription  agreement.  Generally  the  statutes  con- 
fer a  remedy  in  addition  to  suit,  by  way  of  forfeiture  or  sale 
of  the  delinquent  stock.  While  this  is  now  very  generally  per- 
mitted, it  should  be  remembered  that  forfeiture  is  not  allowed 
unless  the  statutes  or  charter  sanction  it.  It  should  be  observed 
that  when  the  remedy  by  forfeiture  is  resorted  to  the  weight 
of  judicial  decision  favors  the  doctrine  that  the  subscriber  is 
thereby  released  from  any  further  liability  upon  his  agree- 
ment. The  validity  of  a  forfeiture  depends  upon  a  strict  com- 
pliance with  the  terms  of  the  statute  authorizing  it.  In  the  first 
place,  the  assessment  must  have  been  in  absolute  accord  with 
law.  Next,  the  stockholder  in  default  must  have  been  notified 
of  the  assessment  and  proposed  forfeiture  for  failure  to  comply. 
This  notice  should  have  correctly  stated  the  amount  due,  the 
time  within  which  and  the  place  where  payment  was  to  be 
made,  and  the  intended  place  of  sale,  as  well  as  any  other  mat- 
ters specified  in  the  governing  statute.  Lastly,  the  forfeiture 
or  sale  must  be  made  in  the  exact  manner  pointed  out  by 
law,  and  must  be  for  the  benefit  of  the  company,  and  not  by 
way  of  mere  collusion  to  relieve  the  stockholder  from  further 
liability.  Elaborate  discussions  of  the  law  relating  to  this 
subject,  as  well  as  citations  of  cases  supporting  the  rules  above 
announced,  may  be  found  in  the  authorities  cited  in  the  note.21 
This  whole  matter  being  statutory,  and  the  statutes  differing 
so  widely  from  one  another,  but  all  prescribing  minutely  the 
practice  in  such  matters,  it  has  been  deemed  best  not  to  insert 
forms  for  the  attempted  guidance  of  the  reader.  The  danger 
in  the  careless  use  of  forms  lies  in  the  f^ct  that  an  important 
provision  of  a  local  statute,  impossible  of  inclusion  in  a  gen- 
eral form,  might  be  omitted,  and  the  use  of  the  form  cause  more 

21 1  Cook,  Corp.  c.  8;   10  Cyc.  pp.  499-509. 
(152) 


Ch.  8)  STOCK.  §  190 

mischief  than  if  the  draftsman  had  modeled  his  own,  following 
the  statute  closely. 

§  188.     Stubs. 

Stock  certificates  are  usually  printed  in  bound  books  similar 
to  bank  checkbooks,  containing  stubs  upon  which  certain  use- 
ful information  with  regard  to  each  certificate  issued  may  be 
entered.  It  will  be  found  convenient  to  keep  these  stubs  care- 
fully and  accurately ;  and  when  the  certificates  are  returned 
for  cancellation  or  transfer  they  are  commonly  pasted  to  the 
stubs  to  which  they  were  originally  attached,  being  indelibly 
marked  "Canceled"  across  their  face,  so  that  they  may  not  by 
any  accident  subsequently  come  into  the  possession  of  a  bona 
fide  holder. 

§  189.     Transfer  of  Stock. 

FORM   OF   TBANSFEB. 

For  value  received,  I  hereby  sell,  transfer,  and  assign  unto 

,  of , shares  of  the  capital 

stock  represented  by  the  within  certificate,  and  do  hereby  irrevocably 

constitute  and  appoint  attorney  to  transfer  the  said 

stock  on  the  books  of  the  company,  with  full  power  of  substitution 
in  the  premises.  

Dated  

Witness :     

§  190.     Precautions  to  be  Taken. 

Very  many  interesting  questions  arise  as  to  the  circumstan- 
ces under  which  the  officers  of  the  corporation  will  be  permitted 
to  make  a  transfer  of  stock  upon  the  request  of  the  holder  of 
the  certificate.  In  the  first  place,  it  is  a  principle  of  law  that, 
in  the  absence  of  a  statute  or  charter  provision  to  the  contrary, 
every  corporation  is  bound  to  make  a  transfer  upon  the  re- 
quest of  the  party^  legally  entitled  to  hold  the  certificate  and  to 
demand  the  transfer;  which  is  merely  saying  that  the  corpora- 
tion must  at  its  peril  determine  whether  the  person  presenting 

(153) 


§  191  BUSINESS   CORPORATIONS.  (Cll.  8 

the  certificate  for  transfer  is  the  legal  holder  of  it,  and  whether 
under  the  circumstances  he  is  entitled  to  demand  a  transfer.22 


§  191.     Identity  of  Holder. 

A  corporation  is  bound  to  know  the  signatures  of  its  stock- 
holders.23 Therefore  the  prudent  secretary  will  always  have 
on  file  the  signature  of  every  person  in  whose  name  a  certificate 
is  issued.  When  a  certificate  is  presented  for  transfer,  the  sig- 
nature to  the  assignment  can  then  be  compared  with  the  reg- 
istered signature  among  the  records  of  the  corporation.  If  the 
two  do  not  correspond,  an  inquiry  must  be  made  and  pursued 
until  the  genuineness  of  the  signature  is  established.24  The 
corporation  may  require  the  personal  attendance  of  the  party 
interested,  for  the  purpose  of  determining  this  question.26 

§  192.     The  Right  of  the  Holder  to  Transfer. 

If  a  person  making  an  assignment  is  not  sui  juris,  the  cor- 
poration will  not  be  protected  by  a  transfer  on  the  order  of 
such  a  person.  An  assignment  by  a  lunatic  is,  for  instance,  in 
some  jurisdictions  void,  upon  the  principle,  announced  by  the 
Supreme  Court  of  the  United  States,26  that  all  contracts  en- 
tered into  by  a  lunatic  are  void.  Other  courts,  however,  have 
declared  them  to  be  simply  voidable,  and  if  third  persons  have 
acquired  rights  under  them  it  is  too  late  to  set  up  their  invalid- 
ity.27 Still,  a  corporation  having  notice  of  the  lunacy  of  a 
stockholder  would  assume  a  great  risk  in  attempting  to  make 
a  transfer  upon  his  order.  It  has  been  held  that  a  corporation 

223  Clark  &  M.  Corp.  §  1720. 

23  10  Cyc.  625. 

24  Western  Union  Telegraph  Co.  v.  Davenport,  97  U.  S.  369,  24  L. 
Ed.  1047 ;    Davis  v.  Bank  of  England,  2  Bing.  393 ;    Ireland  v.  Hart, 
86  L.  T.  (N.  S. ;   Eng.  1902)  385 ;  2  Cook,  Corp.  §  401. 

as  2  Cook,  Corp.  §  410,  and  cases  cited;   Chew  v.  Bank,  14  Md.  299. 

26  Dexter   v.    Hall,    1">   Wall.    (IT.    S.)    9,    21    L.    Ed.    73;     2   Cook, 
Corp.  427. 

27  Chew  v.  Bank,  14  Md.  299;   Clark,  Cont.  208-270. 
(154) 


Ch.  8)  STOCK.  §  193a 

is  justified  in  acting  upon  an  assignment  made  by  a  minor  if 
it  has  not  been  avoided  by  the  minor  at  the  date  of  the  applica- 
tion for  registration.28  This  is  upon  the  ground  that  a  con- 
tract by  a  minor  is  not  void,  but  merely  voidable  at  his  option. 

§  193.     Rights  of  Third  Persons. 

The  company  must  next  ascertain  whether  it  is  in  possession 
of  information  apprising  it,  either  actually  or  constructively,  of 
rights  of  third  persons  in  the  stock.  If  so,  the  respective  rights 
of  the  claimants  must  be  settled  before  a  transfer  can  properly 
be  made.  Where,  for  example,  certain  stock  which  has  been 
issued  in  the  name  of  A.  B.,  as  trustee,  is  presented  for  trans- 
fer, according  to  the  general  trend  of  opinion  the  company 
must  satisfy  itself  that  the  trustee  is  authorized  under  the  terms 
of  his  trust  to  make  the  desired  transfer.29  As  this  informa- 
tion is  sometimes  difficult  to  obtain,  the  following  advice  given 
on  this  subject  by  a  writer  on  the  transfer  of  stock  is  pertinent : 

§  193a.     Forms  of  Certificate  to  Trustee. 

"Xotice  of  a  trust  which  affects  stock  is,  in  general,  obtained 
only  by  means  of  the  certificate,  and  it  is  of  great  importance 
that  certificates  should  not  be  so  issued  as  to  mislead  purchas- 
ers. The  certificate  should  not  state  that  the  owner  holds  the 
stock  as  trustee  unless  it  is  true,  and  if  there  is  a  real  trust  the 
certificate  should  contain  such  a  reference  to  it  that  it  can 
readily  be  identified  and  its  terms  easily  discovered.  The  com- 
mon practice  of  issuing  certificates,  and  inserting  the  word 
'trustee'  after  the  name  of  the  owner,  puts  upon  the  purchaser 
and  the  corporation  an  unnecessary  burden,  and  lays  them  open 
to  indefinite  future  liability.  The  difficulty  of  investigating  a 
trust  described  in  this  way  is  so  great  that  many  purchasers 

28  Smith  v.  Railroad  Co.,  91  Tenn.  221,  18  S.  W.  546. 

2 eiO  Cyc.  621.  and  eases  cited;  1  Cook,  Corp.  §  399,  and  cases 
cited;  3  Clark  &  M.  Corp.  §§  600a,  600b.  and  cases  cited:  Geyser- 
Marion  Gold  Min.  Co.  v.  Stark,  106  Fed.  558,  45  C.  C.  A.  467,  53  L. 
R.  A.  684. 

(155) 


§  194:  BUSINESS   CORPORATIONS.  (Ch.  8 

and  corporations  are  likely  to  prefer  the  risk  of  loss  to  the 
labor  of  hunting  up  the  trust,  and  thereby  the  interests  of  the 
cestui  que  trust  are  imperiled,  while  the  corporation  may  find 
itself  involved  in  a  liability  which  a  little  care  at  the  right  time 
would  have  entirely  prevented."  30 

§  194.     Rights  of  Trustee  to  Transfer. 

A  guardian  is  regarded  as  a  trustee  for  the  purposes  of  the 
application  of  the  rule  of  law  above  announced.31  Whether 
an  executor  holding  under  a  will  is  to  be  regarded  as  a  trustee 
who  must  satisfy  the  corporation  as  to  his  right  to  make  the 
contemplated  transfer  is  somewhat  unsettled  by  the  decisions. 
Probably  where  the  executor  acts  merely  as  such,  and  is  not 
also  made  testamentary  trustee,  the  corporation  will  be  pro- 
tected in  making  a  transfer  merely  on  the  executor's  order,  as 
it  would  be  in  the  case  of  an  administrator,32  without  ascer- 
taining whether  under  the  terms  of  the  will  the  transfer  is  au- 
thorized. But  even  then,  where  the  statute  or  rules  of  court 
of  the  testator's  domicile  require  an  order  of  the  court  before 
such  transfer  can  be  made,  the  exhibition  of  a  certified  copy 
of  such  order  should  be  insisted  upon  by  the  corporation,33  and, 
in  addition,  the  transfer  officer  must  make  sure  that  the  exec- 
utor has  pursued  the  course  mapped  out  by  the  order. 

§  195.     Rights  of  Executor  to  Transfer. 

In  many  cases  an  executor  is  also  appointed  testamentary 
trustee.  When  his  duties  as  executor  are  finished,  the  law 

so  Lowell,  Transfer  Stock,  §  79;  Duncan  v.  Jaudon,  15  Wall.  (U. 
S.)  165,  21  L.  Ed.  142. 

si  Supra,  §  193;  Webb  v.  Manufacturing  Co.,  11  S.  C.  396,  32  Am. 
Rep.  479;  Atkinson  v.  Atkinson,  8  Allen  (Mass.)  15;  O'Herron  v. 
Gray,  168  Mass.  573,  47  N.  E.  429,  40  L.  R.  A.  498,  60  Am.  St  Rep.  411. 

sz  10  Cyc.  622,  and  cases  cited;  2  Cook,  Corp.  §§  329,  398,  and  cases 
cited.  But  see  3  Clark  &  M.  Corp.  600b,  601  a,  601b,  and  cases  cited. 

33  Weyer  v.   Bank,  57  Ind.   198;    Fambro  v.   Gantt,  12  Ala.  298: 
Saxon  v.  Barksdale,  4  Desaus.  (S.  C.)  522. 
(156) 


Ch.  8)  STOCK.  §  197 

itself,  eo  instante  and  without  any  action  of  the  court,  termi- 
nates his  office  as  executor,  and  regards  him  thereafter  as 
testamentary  trustee.3*  It  would  be  difficult  for  the  corporation 
to  know  whether  the  party  proposing  to  transfer  the  stock  was 
really  acting  in  the  capacity  of  executor  or  of  trustee,  and  for 
this  reason  it  would  be  prudent  to  insist  upon  the  exhibition 
of  a  certified  copy  of  the  will  in  each  case.86 

§  196.     Liability  for  Illegal  Transfer. 

The  instant  the, party  is  divested  of  his  character  of  exec- 
utor and  commences  to  hold  stock  as  testamentary  trustee,  then 
all  the  incidents  of  trusteeship  apply,  and  the  company  is  bound 
to  see  that  no  transfer  is  made  in  disregard  of  the  terms  of  the 
trust.86  A  number  of  interesting  cases  have  arisen  where  cor- 
porations have  been  held  to  accountability  because  of  a  disre- 
gard of  this  rule,  some  of  them  cases  which  seem  harsh  in  the 
extreme,  but  which  on  analysis  will  be  found  to  contain  a  just 
and  scientific  exposition  of  the  rule  of  law.87 

§  197.     Jurisdiction  of  Court. 

An  order  of  the  court  will  not  always  protect  the  company. 
The  company  must  satisfy  itself  that  the  court  had  jurisdiction 
to  pass  the  order,  for,  if  not,  the  order  is  void.  As  an  illustra- 
tion, suppose  the  court  should  appoint  an  administrator  of  the 
estate  of  a  party  supposed  to  be  dead,  and  thereafter  authorize 
such  administrator  to  sell  certain  stock  owned  by  his  alleged 
decedent's  estate.  Subsequently  the  supposed  dead  man  ap- 

3*  State,  to  Use  of  Gable,  v.  Cheston,  51  Md.  352,  373;  Yeaton  v. 
Lynn,  5  Pet  (U.  S.)  224,  229,  8  L.  Ed.  105. 

ss  i  Cook,  Corp.  §  398;  Lowry  v.  Bank,  Taney,  310,  Fed.  Cas.  No. 
8,581. 

se  10  Cyc.  622,  and  cases  cited. 

ST  Caulkius  v.  Gaslight  Co.,  85  Tenn.  683,  4  S.  W.  287,  4  Am.  St. 
Rep.  786 ;  Stewart  v.  Insurance  Co.,  53  Md.  564 :  Marbury  v.  Ehlen, 
72  Md.  206,  19  Atl.  648.  20  Am.  St.  Rep.  467 ;  Lowry  v.  Bank,  Taney, 
310.  Fed.  Cas.  No.  8,581. 

(157) 


§  198  BUSINESS    CORPORATIONS.  (Ch.  8 

pears  and  lays  claim  to  the  stock,  and  files  proceedings  against 
the  corporation  for  its  illegal  transfer.  The  order  of  the  court 
would  afford  no  protection.38 

§  198.     Appeal  Pending. 

Again,  an  order  of  a  competent  court  having  jurisdiction  of 
the  subject-matter  may  be  reversed  by  a  higher  court,  in  which 
case  action  taken  pursuant  to  the  order  of  the  court  below  can- 
not be  pleaded  in  defense  of  conduct  contrary  to  that  declared 
proper  by  the  appellate  court.39 

§  199.     Assignment  by  Joint  Owners. 

When  the  title  to  stock  has  been  vested  in  t\vo  or  more  per- 
sons jointly,  the  assignment  must  be  united  in  by  all  in  order 
that  it  may  be  declared  valid.40  This  rule,  however,  does  not 
apply  to  joint  executors  or  administrators,  each  of  whom  alone 
has  power  to  act  on  behalf  of  his  decedent.  A  transfer  signed 
by  one  only,  therefore,  would  pass  title.41 

§  200.     Certificate  of  Stock  Not  Negotiable. 

Certificates  of  stock  are  not  negotiable,42  and,  if  they  are  lost 
or  stolen  from  the  owner  without  fault  on  his  part,  it  has  been 

ss  Scott  v.  McNeal,  154  U.  S.  34,  14  Sup.  Ct  1108,  38  L.  Ed.  896; 
Dewing  v.  Perdicaries,  96  U.  S.  193,  24  L.  Ed.  654. 

3»  3  Cyc.  460.  See  Caulkins  v.  Gaslight  Co.,  85  Tenn.  683,  4  S.  W. 
287,  4  Am.  St  Rep.  786. 

40  2  Cook,  Corp.  §§  398,  429 ;    10  Cyc.  625 ;    Schell  v.  Deperven,  198 
Pa.  591,  48  Atl.  815. 

41  Schell  v.  Deperven,  198  Pa.  600,  48  Atl.  813,  82  Am.   St.  Rep. 
820 ;    Appeal  of  Wood,  92  Pa.  379,  37  Am.  Rep.  694 ;    Williams,  Ex'rs, 
Part  3,  Book  1,  c.  2;   Lowell,  Transfer  of  Stock,  p.  36.     But  see  Bar- 
ton v.  London,  etc.,  R.  R.  Co.,  24  Q.  B.  D.  77. 

42  Western  Union  Tel.  Co.  v.  Davenport,  97  D.   S.  309.  24  L.  Ed. 
1047 ;   George  H.  Hammond  &  Co.  v.  Hastings,  134  U.  S.  401,  10  Sup. 
Ct  727.  33  L.  Ed.  960. 

(158) 


Ch.  8)  STOCK.  §  201 

held  that  his  right  is  superior  to  that  of  any  person  who  may 
acquire  them  by  purchase  from  any  holder.43  This  is  undeniably 
the  general  rule ;  but  when  the  original  owner  has  been  neg- 
ligent, and  by  reason  of  such  negligence  a  certificate  of  stock, 
with  an  assignment  on  the  back  signed  in  blank,  has  come 
into  the  hands  of  a  bona  fide  holder  for  value  without  notice 
of  the  loss  or  theft,  it  has  been  held  in  a  number  of  cases  that 
the  original  owner  is  estopped  from  asserting  his  rights;  as, 
for  instance,  when  the  true  owner  has  pledged  his  stock,  hav- 
ing first  assigned  it  in  blank,  and  it  is  afterwards,  through  a 
breach  of  trust,  sold  to  such  innocent  purchaser.  For  a  full 
discussion  of  this  subject,  the  reader  is  referred  to  the  author- 
ities cited  in  the  note.44  The  Supreme  Court  of  the  United 
States  apparently  favors  the  rights  of  the  innocent  purchaser 
in  such  cases,  as  against  those  of  the  original  owner.45 

§  201.     Lost  Certificates. 

Because  of  the  principles  above  announced,  a  corporation 
should  always  insist  upon  the  surrender  of  the  old  certificate 
before  effecting  a  transfer.46  Wherever,  however,  satisfactory 
proof  has  been  adduced  of  the  loss  of  the  old  certificate,  and 
of  the  fact  that  it  is  unlikely  to  turn  up  in  the  hands  of  a  bona 
fide  purchaser  for  value,  then  the  corporation  may  be  com- 
pelled, upon  proper  security  being  given,  to  issue  a  new  cer- 


43  East  Birmingham  Land  Co.  v.  Dennis,  85  Ala.  565,  5  South.  317, 
2  L.  R.  A.  836,  7  Am.  St.  Rep.  73;    Barstow  v.  Mining  Co.,  64  Cal. 
388,  1  Pac.  349,  49  Am.  Rep.  705;    Knox  v.  Eden  Musee  Co.,  148  N. 
Y.  441,  42  N.  E.  988,  31  L.  R.  A.  779,  51  Am.  St.  Rep.  700. 

44  3  Clark  &  M.  Corp.  §  595  et  seq.,  and  cases  cited;    10  Cyc.  631 
et  seq.,  and  cases  cited;    2  Cook,  Corp.  §§  472-473,  and  cases  cited. 

4<>Cowdrey  v.  Vandenburgh,  101  U.  S.  572,  25  L.  Ed.  923. 

46  South  Bend  First  Nat.  Bank  v.  Lanier,  11  Wall.  (U.  S.)  369,  20 
L.  Ed.  172;  Cleveland  &  M.  R.  Co.  v.  Robbins,  35  Ohio  St.  483; 
Supply  Ditch  Co.  v.  Elliott,  10  Colo.  327,  15  Pac.  691,  3  Am.  St.  Rep. 
T>86 ;  1  Cook,  Corp.  §  402. 

(159) 


§  201a  BUSINESS  CORPORATIONS.  (Ch.  8 

tificate.47     The  new  certificate  should  recite  that  it  is  issued  in 
lieu  of  the  lost  certificate.48 


§  201a.     Indemnity  Bond. 

The  practice  is  first  to  require  an  advertisement  for  a  reason- 
able length  of  time,  stating  the  loss,  and  then  to  take  an  in- 
demnity bond  from  the  party  claiming  the  right  to  the  transfer 
or  to  the  issue  of  the  duplicate  certificate,  to  protect  the  com- 
pany against  any  legal  demand  which  may  subsequently  be 
made.49 


§  202.     Form  of  Indemnity  Bond. 

Know  all  men  by  these  presents  that  we, ,  of , 

as  principal,  and  of as  surety,  are  held 

and  firmly  bound  unto  the Company,  a  corporation  duly 

created  and  existing  under  the  laws  of  the  state  of   

and  its  successors  and  assigns,  in  the  penal  sum  of  $ ,  to  be 

paid  to  the  said  Company,  its  certain  attorney,  suc- 
cessors, or  assigns,  for  which  payment,  well  and  truly  to  be  made, 
we  bind  ourselves  and  each  of  us,  and  our  and  each  of  our  executors, 
administrators,  and  assigns,  firmly  by  these  presents. 

In  testimony  whereof  we  have  hereunto  signed  our  names  and 
aflixed  our  seals  this day  of ,  A.  D.  19. .. 

Whereas,  the  said  has  satisfied  the  said  company 

that  he  is  the  legal  owner  of  certificate  numbered ,  for 

shares  of  the  (insert  "common"  or  "preferred,"  as  the  case  may  be) 
capital  stock  of  said  company,  but  that  the  same  has  been  lost;  and 
the  said  company  has  therefore  issued  to  said a  certifi- 
cate for  a  like  number  of  shares  of  the  same  class  of  stock  in  said 
company  in  lieu  of  said  lost  certificate: 

Now,  therefore,  the  condition  of  the  above  obligation  is  such  that 
if  the  above  bounden ,  and  his  heirs,  executors,  adminis- 
trators, and  assigns,  shall  at  any  and  all  times  hereafter  indemnify 
and  save  harmless  the  said  Company,  and  its  succes- 

47  2  Clark  &  M.  Corp.  §  426. 
*  s  Dill,  N.  J.  Corp.  136-137. 

49  Galveston  City  Co.  v.  Sibley,  56  Tex.  2G9;  Guilford  v.  Telegraph 
Co.,  43  Minn.  434,  46  N.  W.  70 ;  10  Cyc.  620. 

(ICO) 


Ch.  8)  STOCK.  §  202 

sors  and  assigns,  against  any  and  all  actions,  proceedings,  claims, 
and  demands  which  may  be  brought  or  made  against  said  company 
in  consequence  of  its  having  issued  such  new  certificate  as  aforesaid, 
or  in  consequence  of  its  permitting  at  any  time  hereafter  a  transfer 
of  said  shares  or  any  of  them  without  the  protection  of  the  original 
certificate  aforementioned ;  and  shall  also  deliver  or  cause  to  be 
delivered  up  to  said  company  the  said  missing  certificate  for  can- 
cellation if  the  same  shall  hereafter  be  found ;  and  shall  also  reim- 
burse said  company  for  any  and  all  expenses  which  may  be  incurred 
by  it  in  consequence  of  any  of  the  aforementioned  matters :  then  this 
obligation  to  be  null  and  void  ;  otherwise  to  be  and  remain  in  full  force 
and  effect. 

[Seal.] 

LSeal.] 

Signed,  sealed  and  delivered  in  the  presence  of 


CLEPH.BUS.COEP. — 11  (161) 


§  203  BUSINESS   CORPORATIONS.  (Ch.  9 

CHAPTER  IX. 

MEETINGS. 

STOCKHOLDEBS'  MEETINGS. 

§  203.  Formalities. 

204.  Preparation  for. 

205.  Closing  Transfer  Book. 

206.  Compiling  Annual  Reports. 

207.  Access  to  Books,  Etc. 

208.  Reading  the  Minutes. 

209.  Order  of  Business. 

210.  Cumulative  Voting. 

211.  Proxies. 

212.  Distinction  Between  Proxy  and  Power  of  Attorney. 

213.  Voting  Trusts. 
213f.  Form  of. 

DIKECTOBS'  MEETINGS. 

214.  General  Principles. 

215.  Must  Act  as  a  Board. 

216.  Declaration  of  Dividends. 
216a.  Classes  of  Dividends. 
216b.  Cash  Dividends. 

216c.  Stock  Dividends. 

216d.  Scrip  and  Bond  Dividends. 

216e.  Property  Dividends. 

217.  Creating  Bonded  Indebtedness. 
217a.  Classes  of  Bonds. 

217b.  Form  of  Registered  Bond. 
217c.  Form  of  Coupon  Bond. 

218.  Filling  Vacancies. 

219.  Authorizing  Annual  Reports. 

STOCKHOLDERS'  MEETINGS. 

§  203.     Formalities. 

Much  that  has  been  said  while  discussing  the  meeting  of 
incorporators  and  subscribers  to  the  capital  stock  will  apply 
(162) 


Ch.  9)  MEETINGS.  §  205 

as  well  to  the  subject-matter  of  this  chapter.1  Unless  the 
business  to  be  transacted  at  the  meeting  is  of  a  merely  formal 
character,  the  stockholders'  meeting  should  not  be  held  out- 
side of  the  charter  state  without  express  statutory  permission, 
and  even  then,  as  we  have  seen,  there  is  some  doubt  as  to  the 
legality  of  such  proceedings.2  Notice  of  such  meetings  should 
always  be  given  in  the  form  required  by  law  or  by-laws,  un- 
less such  notice  is  waived  by  all  the  stockholders,  either  in 
writing,  or  by  their  attendance,  without  objection,  in  person  or 
by  proxy.8  If  the  meeting  is  a  special  one,  the  call  should 
specify  the  time,  place,  and  business  to  be  transacted  thereat, 
and  no  business  other  than  that  specified  in  the  call  can  be 
legally  done  at  such  meeting.4  Whether  the  meeting  be  reg- 
ular or  special,  then,  though  notice  is  not  required  in  the  case 
of  a  regular  meeting,  the  secretary  will  be  wise  if  he  sends  to 
each  person  entitled  a  communication  calling  attention  to  the 
date,  time,  and  place  thereof,  because  by  so  doing  he  jogs  the 
memory  of  many  who  would  otherwise  forget. 

§  204.     Preparation  for. 

Aside  from  giving  notice  of  the  annual  meeting,  the  secre- 
tary usually  has  several  important  matters  to  attend  to  prior 
to  the  time  set  for  this  assemblage  of  stockholders. 

§  205.     Closing  Transfer  Book. 

He  should  see  that  the  transfer  book  is  closed  the  number 
of  days  prior  to  the  election  which  may  be  prescribed  by  the 
by-laws,  and  permit  no  transfer  of  stock  within  that  period. 
The  object  of  this  is  to  enable  him  to  make  up  the  alphabetical 
list  of  stockholders  commonly  required  to  be  posted  in  his 
office  a  certain  number  of  days  prior  to  the  annual  election.5 

i  Supra,  c.  V.  *  Supra,  §§  87-87f. 

a  Supra,  §§  89.  95-95d. 

4  Schwarzwalder  v.  Tegen,  58  N.  J.  Eq.  319,  326,  43  Atl.  587 ;    10 
Cyc.  323-325;    1  Morawetz,  Priv.  Corp.  §  482. 
s  2  Cook,  Corp.  §  538,  and  cases  cited. 

(163) 


§  206  BUSINESS   CORPORATIONS.  (Cll.  9 

§  206.     Compiling  Annual  Reports. 

He  should  also  remind  the  various  officials  from  whom  yearly 
reports  are  expected  that  the  time  for  making  such  reports  is 
at  hand,  and  furnish  them  with  any  data  which  they  may  de- 
sire from  the  records  of  the  company. 

\ 

§  207.     Access  to  Books,  Etc. 

He  should  prepare  himself  to  answer  any  and  all  questions 
which  his  forethought  might  suggest  would  be  put  to  him  at 
the  meeting,  and  should  have  at  hand,  conveniently  arranged 
for  ready  access,  all  books,  documents,  reports,  etc.,  which  may 
be  called  for. 

§  208.     Reading  the  Minutes. 

When  the  meeting  is  called  to  order,  the  formalities  attend- 
ing its  opening  will  be  much  the  same  as  those  already  outlined 
for  the  first  meeting  of  the  corporation.6  There  will  be,  how- 
ever, one  marked  difference,  consisting  in  the  reading  of  the 
minutes  of  the  previous  meeting — a  detail  which  is  not  essen- 
tial from  the  legal  standpoint,  but  is  of  practical  value  in  order 
to  apprise  stockholders  of  the  condition  of  the  business  of  the 
company  at  the  time  the  last  annual  meeting  was  concluded, 
and  to  remind  them  of  such  unfinished  matters  as  should  prop- 
erly be  considered  at  the  meeting  then  in  session.  It  is  not 
customary  at  special  meetings  to  read  the  minutes  of  the  pre- 
ceding regular  meeting,  but  there  is  no  objection  to  doing 
this.  At  an  adjourned  meeting,  also,  the  minutes  of  the  prior 
meeting  may  profitably  be  read.  After  the  minutes  have  been 
read,  they  should  be  either  approved,  or  ordered  amended  in 
such  places  as  those  assembled  may  decide  then  to  be  inaccu- 
rate. The  secretary  should  notice  every  such  inaccuracy,  and 
correct  it  in  the  margin  of  the  minutes,  with  a  reference  to  the 
motion  or  resolution  by  which  the  correction  was  authorized. 

«  Supra,  §  97  et  seq. 
(164) 


Ch.  9)  MEETINGS.  §  210 

§  209.     Order  of  Business. 

The  order  of  business  at  regular  meetings  will  usually  be  as 
follows : 

1.  Election  of  temporary  officers,  if  this  is  not  provided  for 
in  the  by-laws. 

2.  Roll  call. 

3.  Reading  and  disposition  of  previous  unapproved  minutes. 

4.  Annual  reports  of  officers  and  committees. 

5.  Election  of  directors. 

6.  Unfinished  business. 

7.  New  Business. 

8.  Adjournment. 

§  210.     Cumulative  Voting. 

This  is  a  method  of  voting  which  may  not  be  resorted  to  un- 
less the  statute  of  the  parent  state  or  the  charter  of  the  com- 
pany permits  it.7  It  is  a  device  by  which,  when  permitted,  the 
minority  may  always  secure  and  keep  a  representation  on  the 
board  of  directors.  When  this  right  exists,  a  stockholder  may 
cast  as  many  votes  as  shall  equal  the  number  of  shares  owned 
by  him,  multiplied  by  the  number  of  directors  to  be  elected.  He 
may  cast  all  these  votes  for  a  single  director,  or  a  certain  num- 
ber for  one  director  and  a  less  number  for  another,  or  divide 
them  evenly  among  the  entire  number  of  directors  to  be  elected, 
at  his  option.  By  this  means  the  minority  stockholders  may 
sometimes  elect  a  majority  of  the  board  of  directors,  should  the 
majority  not  be  watchful  to  prevent  this.  To  illustrate,  we 
will  suppose  a  corporation  having  outstanding  10,000  shares 
of  stock.  Five  directors  are  to  be  elected.  The  majority  in- 
terest holds  6,000  shares.  They  distribute  their  votes  evenly 
among  their  five  candidates,  giving  each  6,000  votes.  The 
holders  of  the  other  4,000  shares  distribute  their  votes  among 
three  directors  nominated  by  them,  thus  giving  to  each  director 
6,666^3  votes,  in  this  way  securing  control  of  the  board. 

i  State  v.  Stockley,  45  Ohio  St.  304.  13  X.  E.  279. 

(165) 


§  211  BUSINESS    CORPORATIONS.  (Ch.  9 

§  211.     Proxies. 

At  common  law,  voting  by  proxy  was  not  permitted.8  In 
this  country  legislation  has  generally  changed  this  practice. 
The  usual  proxy,  being  intended  for  the  ordinary  corporate 
purposes  merely,  does  not  authorize  a  vote  to  dissolve  the  cor- 
poration, or  to  sell  the  entire  corporate  assets,  or  a  vote  upon 
other  important  business  outside  of  the  ordinary  functions  of 
a  going  corporation,  unless  the  proxy  itself,  in  general  or 
special  terms,  confers  the  right  to  vote  upon  such  questions.9 
A  mere  proxy  is  always  revocable,  no  matter  how  strongly  it 
may  be  expressed  to  be  irrevocable.10 

§  212.     Distinction  Between  Proxy  and  Power  of  Attor- 
ney. 

A  distinction  not  always  noticed  exists  between  a  proxy 
and  a  power  of  attorney.  The  distinction  is  important  in  cor- 
porations whose  by-laws  prevent  voting  by  proxy  unless  the 
proxy  is  dated  a  certain  number  of  days  before  the  meet- 
ing. Let  us  suppose  the  case  of  three  joint  executors.  It  is 
desired  to  have  one  of  them  only  attend  the  meeting,  and  a 
power  of  attorney  is  given  by  all  to  that  one  to  vote  on  be- 
half of  all  the  shares  of  stock  held  by  the  estate.  The  in- 
spectors of  election  would  have  no  right  to  refuse  to  permit 
this  vote  to  be  cast.  The  power  of  attorney  in  such  case 
would  not  be  a  proxy.  As  was  said  by  the  Court  of  Appeals 
of  the  District  of  Columbia,  when  stock  is  held  jointly  by 
executors,  administrators,  trustees,  or  other  persons  acting  in  a 
fiduciary  capacity,  they  have  the  right  to  designate  one  of  their 
number  to  represent  the  interest  held  by  them  at  corporate 
meetings,  inasmuch  as  the  corporation  is  entitled  to  refuse 
recognition  to  more  than  one  person  to  represent  any  one  in- 

s  Taylor  v.  Griswold,  14  N.  J.  Law,  222,  27  Am.  Dec.  33 ;  Philips 
v.  Wickham,  1  Paige  (N.  Y.)  590. 

»  2  Cook,  Corp.  §  610,  and  cases  cited ;  Smith  v.  Smith,  3  Desaus. 
(S.  C.)  557. 

10  2  Cook,  Corp.  §  610,  and  notes. 
(166) 


Ch.  9)  MEETINGS.  §  213 

terest.  "Indeed,  the  only  way  in  which  stock  held  jointly  can 
be  voted  is  by  authority  from  all  of  them  to  one  of  their  num- 
ber." 11  So,  too,  where  a  corporation  or  a  partnership  owns 
stock,  such  stock  may  be  voted  by  an  individual  agent  or  part- 
ner.12 The  instrument  attesting  his  right  to  vote  the  stock  is 
not  a  proxy,  within  the  meaning  of  the  by-law  above  re- 
ferred to. 

§  213.     Voting  Trusts. 

These  arrangements  may  assume  several  forms.  The  usual 
method  of  effecting  a  voting  trust  at  present  is  for  all  or  a 
certain  number  of  the  stockholders  to  transfer  their  stock,  or  a 
portion  of  it,  into  the  hands  of  trustees,  who  have  the  transfer 
registered  on  the  books  of  the  company,  and  surrender  the 
certificates  so  assigned  to  them,  taking  in  return  a  new  cer- 
tificate of  stock  in  their  own  names  as  trustees;  filing  at  the 
same  time,  as  evidence  of  the  terms  of  their  trust,  a  copy  of 
the  pooling  agreement.  These  trustees  then  issue  to  each 
of  the  persons  in  the  pool  a  certificate  reciting  that  each  own- 
er is  entitled  to  an  interest  in  the  corporation  proportioned  to 
the  number  of  shares  originally  deposited  by  him  or  his  as- 
signor, and,  upon  the  receipt  of  dividends  upon  the  trust  stock 
held  by  them,  the  trustees  will  pay  over  to  each  certificate 
holder  an  amount  equal  to  the  dividend  which  would  have  come 
to  him,  had  he  retained  his  original  certificate  of  stock — less, 
of  course,  his  proportion  of  the  expenses  incident  to  carrying 
out  the  pooling  agreement.  By  the  arrangement  between  the 
original  stockholders  and  the  trustees,  these  pool  certificates  are 
transferable  to  the  same  extent  as  a  certificate  of  stock  would 
be ;  but  the  transfer  does  not  carry  with  it  the  voting'  power, 
which  is  lodged  permanently  during  the  life  of  the  trust  in  the 
trustees  themselves.  The  voting  power  is  thus  separated  from 
the  beneficial  ownership  or  the  interest  in  the  corporation.  The 

11  Scanlan  v.  Snow,  2  App.  D.  C.  154. 

12  State  v.  Rohiffs  (N.  J.  Sup.  1890)  19  Atl.  1099. 

(167) 


§  213a  BUSINESS  CORPORATIONS.  (Ch.  9 

scheme  is  useful  to  enable  certain  persons  to  control  the  pol- 
icy of  the  corporation. 

§  213a.  The  validity  of  these  agreements  has  frequently 
been  under  discussion  in  the  courts.  Little  was  known  of 
such  combinations  twenty  years  ago,  but  during  the  last  ten 
years  they  have  become  quite  common.  The  decisions  are  in 
conflict,  and  it  is  difficult  to  lay  down  any  rule  which  may 
safely  be  followed.  Mr.  Cook,  in  his  work  on  Corporations, 
after  a  careful  review  of  the  authorities,  comes  to  the  conclu- 
sion "that  a  deposit  of  certificates  of  stock  with  trustees  for  a 
specified  period  of  time,  either  with  or  without  a  transfer  of 
the  same  to  the  trustees,  is  legal,  and  is  not  in  violation  of  the 
usual  statute  against  restraints  on  the  alienation  of  personal 
property,  and  is  not  opposed  to  public  policy,  as  a  restraint  upon 
trade,  and  is  not  an  implied  fraud  upon  stockholders  who  are 
not  allowed  to  participate,  and  is  not  an  illegal  separation  of 
the  voting  power  from  the  ownership  of  the  stock,  provided, 
always,  that  no  actual  fraud  is  involved  in  the  transaction.  In 
other  words,  such  a  pooling  of  stock  is  not  illegal  in  itself, 
but,  like  all  contracts,  may  be  illegal  if  actual  fraud  is  in- 
volved." 13  This  is  probably  the  correct  conclusion  to  be  drawn 
from  a  thoughtful  study  of  the  cases. 

§  213b.  Voting  trusts  have  been  sustained  in  cases  arising 
both  in  the  federal  and  state  courts  in  Massachusetts,14  New 
York,15  New  Jersey,16  Alabama,17  Illinois,18  and  California.18 

is  2  Cook,  Corp.  bottom  pages  13G9-1371. 

i*  Brightman  v.  Bates  (1900)  175  Mass.  105,  55  N.  E.  809. 

IB  Brown  v.  Steamship  Co.  (1867)  5  Blatchf.  525,  Fed.  Cas.  No. 
2,025;  Havemeyer  v.  Havemeyer  (1878)  43  N.  Y.  Super.  Ct.  506,  af- 
firmed 8G  N.  Y.  618 ;  Williams  v.  Montgomery  (1896)  148  N.  Y.  519, 
43  N.  E.  57 ;  Hey  v.  Dolphin  (1895)  92  Hun,  230,  36  N.  Y.  Supp.  627. 

10  Chapman  v.  Bates  (1895)  61  N.  J.  Eq.  658,  47  Atl.  G38,  88  Am. 
St.  Rep.  459. 

IT  Mobile  &  O.  R.  Co.  v.  Nicholas  (1892)  98  Ala.  92,  12  South.  723. 

isziegler  v.  Railroad  Co.  (C.  C.  3895)  69  Fed.  176. 

is  Smith  v.  Railroad  Co.  (1897)  115  Cal.  584,  47  Pac.  582,  35  L.  R. 
A.  309,  56  Am.  St.  Rep.  119. 

(168) 


Ch.  9)  MEETINGS.  §  213d 

Statf. legislatures,  realizing  that  the  demands  of  modern  busi- 
ness require  that  these  combinations  should  be  sanctioned, 
have  given  them  validity  in  the  states  of  Pennsylvania  20  and 
New  York.21 

§  213c.  On  the  other  hand,  such  pooling  agreements  have 
been  condemned  in  the  following  states:  Connecticut,22  New 
York,23  New  Jersey,24  Pennsylvania,25  North  Carolina,26 
Georgia,27  Alabama,28  Ohio,29  and  Colorado.30 

§  213d.  The  effect  of  the  decisions  in  New  York  and  Penn- 
sylvania holding  such  trusts  illegal  is  now  nullified,  so  far  as 
future  trusts  are  concerned,  by  the  statutes  of  those  states 
above  referred  to.31  The  earlier  decisions  in  New  Jersey  did 
not  denounce  all  voting  trusts,  and  intimated  that  such  trusts 
might  be  legal  under  certain  circumstances;  and  under  a 
later  decision32  such  a  trust  was  upheld.  Most  of  the  other 
decisions  referred  to  in  the  paragraph  immediately  preceding 

20  Act  May  7,  1889. 

21  Chapter  355,  Inc.  Law  1901 ;  G.  C.  L.  §  20. 

22  Starbuck  v.  Trust  Co.  (1890)  60  Conn.  576,  24  Atl.  32. 

23  Fisher  v.  Bush  (1885)  35  Hun  (N.  Y.)  641 ;    Woodruff  v.  Railroad 
Co.  (C.  C.  1887)  30  Fed.  91. 

24  Cone  v.  Russell  (1891)  48  N.  J.  Eq.  208,  21  Atl.  847;    White  v. 
Tire  Co.  (1893)  52  N.  J.  Eq.  178,  28  Atl.  75 ;    Clowes  v.  Miller  (1900) 
60  N.  J.  Eq.  179,  47  Atl.  345 ;    Kreissel  v.  Distilling  Co.  (1900)  61  N. 
J.  Eq.  5,  47  Atl.  471 ;   Warren  et  al.  v.  Pirn  (N.  J.  Ch.  1903)  55  Atl.  66. 

25  Vanderbilt  v.  Bennett  (1887)  6  Pa.  Co.  Ct.  R.  193,  2  Ry.  &  Corp. 
Law  J.  409. 

ze  Harvey  v.  Improvement  Co.  (N.  C.  1896)  24  S.  E.  489,  32  L.  R. 
A.  265,  54  Am.  St.  Rep.  749. 

27  Clarke  v.  Banking  Co.  (C.  C.  1892)  50  Fed.  338,  15  L.  R.  A.  683. 

28  Moses  v.  Scott  (1887)  84  Ala.  608,  4  South.  742. 

29  Hafer  v.  Railroad  Co.  (1886)  14  Wkly.  Law  Bull.  68;    State  v. 
Oil  Co.  (1892)  49  Ohio  St.  147,  30  N.  E.  279.  15  L.  R.  A.  145,  34  Am. 
St.  Rep.  541 ;    Ohio  &  M.  Ry.  Co.  v.  State  (1892)  49  Ohio  St.  668,  32 
N.  E.  933. 

so  Gould  v.  Head  (C.  C.  1889)  38  Fed.  886. 
si  Supra,  §  213b,  and  notes. 

32  Chapman  v.  Bates,  61  N.  J.  Eq.  658,  47  Atl.  638,  88  Am.  St.  Rep. 
459. 

(169) 


§  213e  BUSINESS  CORPORATIONS.  (Ch.  9 

are  either  those  of  inferior  courts,  or  are  based  upon  certain 
circumstances  surrounding  the  particular  cases — as,  for  in- 
stance, that  the  purpose  of  the  parties  to  the  trust  was  to  accom- 
plish an  illegal  object;  that  the  agreement  was  without  con- 
sideration, and  was  a  mere  proxy,  not  coupled  with  an  interest ; 
that  the  owners  of  the  beneficial  interest  could  have  no 
possible  voice  in  the  voting;  that  the  trustees  had  themselves 
no  beneficial  interest,  and  therefore  could  not  be  expected  to 
give  their  best  thought  to  the  welfare  of  the  corporation ; 
that  it  was  one-sided,  resulting  in  a  special  benefit  to  one  or  a 
few  parties,  giving  no  rights  to  others  to  come  in  and  par- 
ticipate in  it ;  or  that  a  statute  was  violated. 

§  213e.     In   drafting   a  pooling   agreement,   the   following 
points  should  be  watchfully  guarded: 

A.  The  instrument  should  contain  a  recital,  preferably  un- 
der seal,  showing  that  the  contract  is  entered  into  for  the 
benefit  of  the  whole  body  of  stockholders.33 

B.  The  pool  trustees  should  themselves  be  stockholders  hav- 
ing a  beneficial  interest  in  the  corporation.     It  would  be  wise 
to  insert  a  provision   waiving  any   right  to   object  to   their 
voting  themselves  into  office.34 

C.  Provide   for  the  substitution   and  appointment  of   new 
trustees.     If  the  original  trustees  and  the  survivors  are  given 
the  power  of  appointment  and  substitution,  the  object  of  the 
trust  is  best  subserved. 


ss  Hey  v.  Dolphin,  92  Hun,  230,  36  N.  Y.  Supp.  627;  Kreissel  v. 
Distilling  Co.,  61  N.  J.  Eq.  5,  47  Atl.  471 ;  White  v.  Tire  Co.,  52  X.  J. 
Eq.  178,  28  Atl.  75 ;  Chapman  v.  Bates,  61  N.  J.  Eq.  658,  47  Atl.  638, 
88  Am.  St.  Rep.  459;  Ohio  &  M.  R.  Co.  v.  State,  49  Ohio  St.  668, 
32  N.  E.  933;  Smith  v.  Railroad  Co.,  115  Cal.  584,  47  Pac.  582,  35 
L.  R.  A.  309,  56  Am.  St.  Rep.  119 ;  Havemeyer  v.  Havemeyer,  43  N. 
Y.  Super.  Ct.  506 ;  Warren  v.  Pirn  (N.  J.  Ch.)  55  Atl.  66. 

s<Hafer  v.  Railroad  Co.,  14  Wkly.  Law  Bull.  (Ohio)  68;    Clarke 
v.  Banking  Co.  (C.  C.)  50  Fed.  338,  15  L.  R.  A.  083:    Cone  v.  Russell, 
48  N.  J.  Eq.  208,  21  Atl.  847 ;    Shepaug  Voting  Trust  Cases,  60  Conn. 
553,  24  Atl.  32. 
(170) 


Ch.  9)  MEETINGS.  §  213e 

D.  =Recite  some  consideration  other  than  the  mere  mutual 
covenants,  as,  for  instance  (if  this  be  the  fact),  that  the  for- 
mation of  the  pool  was  one  of  the  considerations  leading  up  to 
the  purchase  of  the  stock.    The  agreement  had  better  be  under 
seal.35 

E.  Confer  upon  all  stockholders  the  right  to  become  parties 
to  the  pool  by  depositing  their  stock.36     But  a  close  watch 
should  be  kept  to  see  that  the  number  of  persons  holding,  stock 
in  their  own  names  is  not  reduced  below  the  minimum  limit 
prescribed  by  the  statute. 

F.  Where  it  is  desired  to  limit  the  number  of  the  stock- 
holders in  the  corporation,  the  agreement  should  contain  a 
stipulation  that  any  certificate  holder  desiring  to  part  with  his 
interest  should  first  offer  it  to  the  company,  or  to  other  parties 
to  the  agreement,  before  selling  it  elsewhere.     Such  an  agree- 
ment has  been  sustained  by  the  Supreme  Court  of  the  United 
States.37 

G.  The  trust  should  be  limited  to  a  short  term  of  years, 
never  in  excess  of  the  time  prescribed  by  statute  for  the  life 
of  a  proxy.38 

H.  Provide  some  method  of  directing  the  vote  of  the  trus- 
tees by  the  certificate  holders,  either  through  a  meeting  as- 


35  Smith  v.  Railroad  Co.,  115  Cal.  584,  47  Pac.  582,  35  L.  R.  A. 
309,  56  Am,  St  Rep.  119;  Griffith  v.  Jewett,  15  Wkly.  Law  Bull. 
(Ohio)  419 ;  Hey  v.  Dolphin,  92  Hun,  230,  36  N.  Y.  Supp.  627 ;  Van- 
derbilt  v.  Bennett,  6  Pa.  Co.  Ct  R.  193;  Brightman  v.  Bates,  175 
Mass.  105,  55  N.  E.  809;  Clowes  v.  Miller,  60  N.  J.  Eq.  179,  47  Atl. 
345 ;  Woodruff  v.  Railroad  Co.  (C.  C.)  30  Fed.  91 ;  Fisher  v.  Bush,  35 
Hun  (N.  T.)  641 ;  Warren  v.  Piin  (N.  J.  Ch.)  55  Atl.  66. 

se  Chapman  v.  Bates,  61  N.  J.  Eq.  658,  47  Atl.  638,  88  Am.  St. 
Rep.  459;  Kreissel  v.  Distilling  Co..  61  N.  J.  Eq.  5,  47  Atl.  471; 
Warren  v.  Pirn  (N.  J.  Ch.)  55  Atl.  66. 

37  Morgan  v.  Struthers,  131  U.  S.  246,  9  Sup.  Ct.  726,  33  L.  Ed.  132; 
Jones  v.  Brown,  171  Mass.  318,  50  N.  E.  648. 

33  Moses  v.  Scott,  84  Ala.  608,  4  South.  742:  Fisher  v.  Bush,  35 
Hun  (N.  Y.)  641 ;  Warren  v.  Pirn  (N.  J.  Ch.)  55  Atl.  66. 

(171) 


§  213e  BUSINESS  CORPORATIONS.  (Ch.  9 

sembled  for  that  purpose,  or  by  written  direction  withoj$  such 
meeting.39 

I.  If  desired,  confer  upon  the  trustees  the  right  to  vote  for 
the  sale  of  the  corporate  assets  and  franchises,  should  that 
question  be  presented,  or  to  dissolve  the  corporation,  or  to  do 
any  other  act  in  the  same  manner  as  if  the  beneficial  owners 
were  personally  voting.40 

J.  Provide  for  the  issue  of  trust  certificates,  and  specify 
their  form. 

K.  Make  such  trust  certificates  assignable. 

§  213f.  The  following  form  has  been  found,  in  practice, 
well  adapted  to  accomplish  the  ends  desired : 

VOTING  TBUST  AGREEMENT. 

This  agreement  made  this day  of ,  A.  D. 

19. .,  by  and  between  the  undersigned  stockholders  of  the 

Company,  a  corporation  created  and  existing  under  the  laws  of  the 

state  of  ,  hereinafter  called  "the  subscribers,"  parties 

of  the  first  part,  and ,  of , of 

and  ,  of  ,  hereinafter  called 

"the  trustees,"  parties  of  the  second  part : 

Whereas,  it  is  deemed  important  to  the  interests  of  the  subscrib- 
ers to  create  a  trust  with  the  shareholding  body  as  beneficiaries 
thereof,  in  order  that  the  stock  of  said  company  shall  not  be  liable 
to  be  bought  up  for  speculative  control,  and  to  secure  safe  and  pru- 
dent management  in  the  interests  of  the  whole  number  of  stock- 
holders ;  and 

Whereas,  a  number  of  the  subscribers  hereto  have  purchased  the 
stock  of  said  company  upon  the  distinct  agreement  and  understand- 
ing that  this  voting  trust  should  be  created : 

Now,  therefore,  this  agreement  witnesseth   that  in  consideration 

so  Brown  v.  Steamship  Co.,  5  Blatchf.  525,  Fed.  Cas.  No.  2,025; 
Ohio  &  M.  R.  Co.  v.  State,  49  Ohio  St.  668,  32  N.  E.  933 ;  Clowes  v. 
Miller,  60  N.  J.  Eq.  179,  47  Atl.  345;  Havemeyer  v.  Havemeye.r.  43 
X.  Y.  Super.  Ct.  506;  Smith  v.  Railroad  Co.,  115  Cal.  584,  47  PJK-. 
582,  35  L.  R.  A.  309,  56  Am.  St.  Rep.  119;  Vanderbilt  v.  Bennett, 
6  Pa.  Co.  Ct.  R.  193 :  Warren  v.  Pirn  (N.  J.  Ch.)  55  Atl.  6G. 

402  Cook,  Corp.  §  610. 
(172) 


Ch.  9)  MEETINGS.  §  213f 

of  the  premises,  and  of  the  benefits  to  be  derived  from  the  mutual 
observance  of  the  stipulations  hereinafter  contained,  and  for  other 
good  and  valuable  considerations  from  each  to  the  other  moving, 
the  receipt  whereof  are  hereby  acknowledged,  the  parties  hereto 
mutually  agree  upon  the  covenants  hereinafter  contained,  this  agree- 
ment, however,  not  to  become  operative  until  the  owners  of  a  major- 
ity of  the  shares  into  which  the  capital  stock  of  said  company  is 
divided,  shall  in  person  or  by  attorney  have  signed  or  ratified  this 
agreement  and  delivered  their  certificates  of  stock  as  hereinafter 
specified. 

1.  The  subscribers  agree  to  assign  and  transfer  on  the  books  of 
the  company,  unto  the  trustees  and  their  successors  in  the  adminis- 
tration of  this  trust,  the  number  of  shares  of  stock  owned  or  held  by 
them  in  said  company,  set  opposite  their  respective  signatures  hereto, 
and  to   respectively  authorize  and  empower  the  said  trustees  and 
their  successors  as  aforesaid,  as  attorneys  in  fact  for  said  subscrib- 
ers, to  .cause  said  transfer  to  be  made  on  the  books  of  said  company, 
subject  to  the  trusts  and  conditions  hereinafter  declared,  and  for  this 
purpose  to  deliver  to  said  trustees  and  their  successors  as  aforesaid 
the  certificates  evidencing  the  said  stock  now  owned  by  them,  re- 
spectively. 

2.  The  said  shares  of  stock  so  transferred  shall  be  held  by  said 
trustees  and  their  successors  for  the  common  benefit  of  all  the  par- 
ties to  this  agreement  and  all  those  who  may  become  such  as  herein 
provided  under  the  terms  and  conditions  hereinafter  set  forth. 

3.  As  soon  as  practicable  after  said  transfer  of  said  stock  on  the 
books  of  said  company  shall  have  been  made,  said  trustees  shall  exe- 
cute and  deliver  to  each  of  the  subscribers  hereto,  and  his  assigns, 
assignable  trust  certificates  for  the  number  of  shares  set  opposite 
their  respective  names,  which  certificates  shall  be  in  the  following 
form : 

Company. 


VOTING  TKUST  CERTIFICATE. 

Xo Shares. 

This  is  to  certify  that and  his  assigns  is  entitled  to 

shares,  of  par  value  of ($ )  dollars 

each,  of  the  beneficial  interest  in  the  capital  stock  of  the 

Company,  certificates  for  which  have  been  issued  to  us,  as  trustees, 
under  and  in  pursuance  of  a  certain  trust  agreement  mad«  between 
certain  stockholders  of  said  company  and  ourselves,  as  trustees, 
dated  the day  of A.  D.  19... 

(173) 


§  213f  BUSINESS   CORPORATIONS.  (Ch.  9 

The  holder  of  this  certificate  is  entitled  to  the  beneficial  right  and 
interest  provided  in  and  by  said  trust  agreement,  including  a  pro- 
portionate share  of  all  dividends  declared  and  paid  on  the  stock  of 
said  company  held  in  trust  as  aforesaid,  less  his  proportionate  share 
of  the  expenses  incident  to  this  trust. 

In  witness  whereof  the  said  trustees  have  hereunto  set  their  hands 

and  affixed  their  seals  on  the day  of  A. 

D.  19...  [Seal.] 

[Seal.] 

[Seal.] 

4.  The  interest  in  the  stock  to  be  assigned  to  the  trustees  as  herein 
provided  is  assignable  by  transfer  upon  books  to  be  kept  for  that 
purpose  by  the  trustees  or  their  successors  as  aforesaid,  by  the  holder 
of  said  trust  certificate  or  certificates  in  person,  or  by  written  power 
of  attorney  to  that  effect,  accompanied  by  a  surrender  of  said  certifi- 
cate or  certificates ;   and  a  transferee,  by  accepting  a  new  certificate 
in  lieu  of  the  one  so  surrendered,  shall  be  deemed  to  have  assented  to 
the  terms  and  conditions  of  this  agreement. 

5.  A  list  of  the  shares  of  stock  deposited  with  the  trustees  as  here- 
in provided,  as  well  as  a  record  of  all  trust  certificates  issued  and 
transferred,  shall  be  made  and  kept  by  said  trustees  and  their  suc- 
cessors, which  shall  contain  the  names  and  addresses  of  said  certifi- 
cate holders,  and  the  number  of  shares  held  by  each,  which  said 
record  shall  be  open  to  the  inspection  of  any  certificate  holder  de- 
manding the  same. 

6.  The  trust  hereby  created  shall  vest  in  the  parties  of  the  second 
part  and  their  successors  in  office.    In  case  any  of  the  said  trustees 
shall  decline  to  accept  or  serve,  or  upon  the  resignation  of  any  of  the 
said  trustees,  or  whenever  any  of  the  said-  trustees  shall  part  with 
his  beneficial  interest  in  said  company,  his  office  shall  be  deemed  to 
be  vacant,  and  the  surviving  or  remaining  trustees  shall  elect  his 
successor,  who  shall  have  and  exercise  hereunder  the  same  powers 
and  duties  as  were  intrusted  to  his  predecessor  in  office;    it  being 
distinctly  understood  that  such  successor  shall  always  hold  a  bene- 
ficial interest  in  the  stock  of  said  company.     Nothing  in  this  agree- 
ment shall  be  construed  to  prevent  any  one  of  said  trustees  from  be- 
coming an  individual  owner  of  trust  certificates  as  aforesaid,  or  of 
voting  for  himself  as  an  officer  or  director  of  said  company. 

7.  Said  trustees  shall  have  power  to  admit  to  the  benefits  of  this 
trust,  on  an   equal  footing  with  the  original  parties  thereto,  such 
stockholders  in  said  company  as  may  desire  to  become  parties  to  this 
agreement. 

(174) 


Ch.  9)  MEETINGS.  §  213f 

8.  The  trust  hereby  created  shall  continue  until  the 

day  of ,  19. .,  provided  that  the  holders  of  a  (fill  in  the 

fractional  interest  as  desired)  interest  in  the  stock  held  by  the  trus- 
tees as  herein  provided  may  at  any  time  terminate  this  trust  at  any 
meeting  called  for  that  purpose;    written  notice  thereof  having  been 
previously  mailed  to  each  certificate  holder  at  least  ten  days  prior 
to  the  time  fixed  for  such  meeting.     Upon  the  termination  of  said 
trust,  the  said  trustees  shall  assign  and  transfer  to  the  then  holders 
of  the  trust  certificates  the  amount  of  stock  to  which  each  holder 
thereof  shall  be  entitled  upon  the  surrender  of  his  trust  certificate  or 
certificates. 

9.  The  subscribers  hereby  constitute  and  appoint  the  said  parties 
of  the  second  part,  and  their  successors  in  office,  their,  and  each  of 
their,  true  and  lawful  attorneys  and  proxies  'to  appear  for,  represent, 
and  vote  for  them  at  all  meetings  of  the  stockholders  of  the  said 
company,  with  power  to  vote  upon  any  and  all  questions  which  may 
arise  at  any  such  meeting  or  meetings,  including  the  sale  or  mort- 
gage of  the  entire  franchise,  assets,  and  property  of  the  corporation, 
or  the  dissolution  of  such  corporation,  as  fully  and  with  the  same 
effect  as  the  said  subscribers,  or  any  of  them,  if  personally  present, 
could  do.    And  if  any  difference  of  opinion  should  arise  among  said 
trustees  or  their  successors  as  to  the  proper  vote  to  be  cast,  then 
the  voice  of  the  majority  of  said  trustees  shall  govern ;   and  it  shall 
not  be  necessary  for  said  trustees  to  assemble  together  to  consider 
any  proposition,  nor  for  all  of  said  trustees  to  attend  all  meetings 
of  stockholders,  but  the  wishes  of  such  absent  trustee  or  trustees 
shall  be  evidenced  by  a  writing  signed  by  such  absent  trustee  or 
trustees.     And   the  said  trustees   and  their   successors   are   hereby 
authorized  to  designate  some  one  of  their  number  .to  actually  cast 
the  vote  which  all  of  said  trustees,  by  reason  of  their  being  joint 
stockholders,  shall  be  entitled  to  cast. 

10.  Should  any  question  arise  upon  which  any  one  of  said  trustees 
shall  desire  the  action  of  the  holders  of  the  trust  certificates,  or 
upon  which  the  owners  of  a  majority  in  value  of  said  trust  certifi- 
cates shall  desire  such  action,  a  meeting  for  such  purpose  may  be 
called  by  the  trustees  or  majority  owners  desiring  same  as  afore- 
said, notice  of  which  shall  be  given  in  writing  by  United  States  mail, 
addressed  to  each  of  said  certificate  holders  at  his  last  known  place 
of  residence,  stating  specifically  the  time,  place,  and  object  of  the 

meeting ;    such  notice  to  be  mailed  at  least days  before 

the  time  fixed  for  holding  said  meeting.     At  such  meeting  the  own- 
ers of  such  trust  certificates  may  determine,  by  a  two-thirds  vote  in 
value  of  the  certificates  so  held  by  them,  the  manner  in  which  they 

(175) 


§  213f  BUSINESS    CORPORATIONS.  (Cll.  9 

desire  the  said  trustees  to  vote;  each  certificate  holder  being  en- 
titled to  one  vote,  either  in  person  or  by  proxy,  for  each  share  of  his 
beneficial  interest  in  the  capital  stock  of  said  company.  The  result 
of  said  vote  shall  be  certified  to  the  said  trustees  by  the  secretary 
of  said  meeting,  and  the  said  trustees  shall  cast  their  vote  ac- 
cordingly. 

11.  The  legal  title  to  all  stock  transferred  under  or  by  virtue  of 
this  agreement  shall  remain  vested  in  the  said  trustees  and  their 
successors  in  trust,  and  they  shall  not  sell,  transfer,  or  assign  the 
same  during  the  continuance  of  the  trust  hereby  created. 

12.  The  said  trustees  shall  receive  all  dividends  which  may  be 
declared  from  time  to  time  upon  the  stock  held  by  them  as  aforesaid, 
and  shall  immediately  pay  out  the  same  to  the  holders  of  the  trust 
certificates  as  their  respective  interests  may  from  time  to  time  ap- 
pear. 

.13.  The  said  trustees  shall  be  indemnified  and  saved  harmless 
from  any  and  all  expenses,  costs,  damages,  and  other  liability  arising 
out  of  the  acceptance  of  this  trust  and  the  issue  of  the  trust  certifi- 
cates as  aforesaid,  each  certificate  holder  being  liable  for  and  agree- 
ing to  contribute  his  proportionate  share  thereof;  and,  whenever 
any  funds  shall  come  into  the  hands  of  said  trustees  for  distribution, 
they  may  deduct  therefrom  a  sum  sufficient  to  indemnify  them  as 
aforesaid,  and  divide  the  balance  pro  rata  among  the  owners  of  said 
trust  certificates. 

14.  In  case  any  certificate  holder  shall  desire  to  sell  the  beneficial 
interest  in  said  company  owned  by  him,  or  any  part  thereof,  he  shall, 
before  offering  the  same  to  any  one  else,  first  notify  said  trustees  of 
the  number  of  shares  thereof  which  he  desires  to  sell,  and  said 
trustees  shall  immediately  notify  all  of  the  holders  of  trust  certifi- 
cates, at  their  last  known  place  of  address,  respectively,  of  such  con- 
templated sale;  and  if  the  party  desiring  to  sell  as  aforesaid  shall 
not,  within  ten  days  after  so  notifying  said  trustees,  receive  an  offer 
for  said  certificates  satisfactory  to  him  from  one  of  said  certificate 
holders,  he  may  then,  and  not  until  then,  offer  said  interest  for  sale 
to  some  one  not  a  party  to  this  trust  agreement:  provided,  that  such 
holder  desiring  to  make  sale  as  aforesaid  shall  not  at  any  time 
dispose  of  any  portion  of  his  beneficial  interest  to  any  outside  per- 
son for  the  same  or  at  a  less  price  than  he  shall  be  offered  therefor 
by  some  party  to  this  agreement. 

In    witness   whereof    the    undersigned   stockholders    as    aforesaid 

have  hereunto  subscribed  their  names  and  affixed  their  seals,  and  set 

opposite  each  signature  the  number  of  shares  held  or  owned  by  them. 

respectively,  which  they  desire  to  have  held  in  trust  as  aforesaid: 

(176) 


Ch.  9)  MEETINGS.  §  215 

and  the  said  trustees,  as  an  evidence  of  the  acceptance  of  the  trust 
hereby  created,  have  also  signed  and  sealed  these  presents. 

Dated  at  the  city  of on  the day  of 

,  A.  D.  19... 

[Seal.] Shares. 

[Seal.]  Shares. 

[Seal.]  Shares. 

[Seal.]  Shares. 

[Seal.] 

Trustee. 

t [Seal.] 

Trustee. 

[Seal.] 

Trustee. 

DIRECTORS'  MEETINGS. 

§  214.     General  Principles. 

The  general  principles  governing  stockholders'  meetings  also 
apply  to  meetings  of  the  directors.41  The  law  as  to  the  time 
and  place  of  meeting,  and  relating  to  the  notice  to  be  given, 
has  already  been  sufficiently  discussed.  The  stringent  rule  of 
law  that  directors  cannot  vote  by  proxy  has  also  been  stated.42 

§  215.     Must  Act  as  a  Board. 

Directors  must  act  together  as  a  board  in  all  matters  in- 
volving the  exercise  of  discretion.  The  stockholders  have  a 
right  to  insist  upon  the  opportunity  for  free  discussion  and 
interchange  of  views,  and,  unless  this  is  afforded,  except  in 
matters  purely  ministerial,  the  directors  are  not  living  up  to 
the  measure  of  the  obligation  imposed  upon  them.  If  they 
choose  to  take  the  risk  of  acting  upon  the  individual  assent 
of  the  various  members  of  the  board,  they  may,  of  course,  do 
so;  but  if  this  action  should  not  be  subsequently  ratified 
in  meeting  it  would  be  void,  and  any  steps  taken  under  it 
might  subject  the  party  assuming  to  act  in  this  way  to  liabil- 

"  Supra,  §  203  et  seq. 

42  Supra,  §  139;    10  Cyc.  776. 

Ci.EPH.Bus.CoRr.— 12  (177) 


§  216  BUSINESS    CORPORATIONS.  (Ch.  9 

ity.43  In  order  to  permit  this  individual  assent  outside  of 
meeting  to  be  legal  and  binding,  the  statutes  sometimes  provide 
that  any  action  assented  to  by  the  directors  in  writing,  although 
not  at  a  meeting,  shall  be  as  valid  as  if  the  directors  had  been 
assembled  to  discuss  the  proposition.  It  is  believed  that,  in  the 
absence  of  a  statute,  if  a  charter  should  contain  such  a  provi- 
sion, no  stockholder  could  be  heard  to  object  to  this  man- 
ner of  procedure.** 

§  216.     Dividends. 

The  declaration  of  dividends  generally  rests  with  the  di- 
rectors, who  may  fix  the  amounts  and  times  and  places  of  pay- 
ment.46 They  can  only  be  declared  out  of  the  profits,  except 
when  the  company  is  in  liquidation  and  its  corporate  assets  are 
being  divided  among  shareholders.46  The  general  rule  is  that 
a  dividend  belongs  to  the  owner  of  the  stock  at  the  time  it  is 
declared,  irrespective  of  the  date  when  it  is  earned,  although 
it  may  be  made  payable  at  a  future  date.47  When  declared,  it 
becomes  the  separate  property  of  the  owner  of  the  stock  at  the 
time  it  is  declared,  and,  in  the  absence  of  a  special  agreement, 
if  the  stock  is  subsequently  sold,  the  sale  does  not  carry  the 
right  to  declared  dividends.48  In  distributing  dividends  the 
directors  have  no  power  to  discriminate  among  shareholders 
of  the  same  class.*9 

43  10  Cyc.  774-776;  2  Cook,  Corp.  §  713a,  and  cases  cited;   Clark  & 
M.  Corp.  §  677,  and  notes. 

44  Supra,  §  73,  and  notes. 

4»2  Cook,  Corp.  §  545,  and  notes;  10  Cyc.  548,  549,  883,  and  cases 
cited. 

*«  2  Cook,  Corp.  §  546,  and  note ;    10  Cyc.  551. 

47  Houser  v.  Richardson,  90  Mo.  App.  134 ;    2  Cook,  Corp.  §  539, 
and  notes;    10  Cyc.  556,  and  cases  cited. 

48  Hopper  v.  Sage,  112  N.  Y.  530,  20  N.  B.  350,  8  Am.  St.  Rep.  771. 
4»  Jones  v.  Railroad  Co.,  57  N.  Y.  196;   2  Clark  &  M.  Corp.  §  525b, 

and  notes ;   2  Cook,  Corp.  §  540,  and  note. 
(178) 


Ch.  9)  MEETINGS.  §  216d 

§  216a.     Classes  of  Dividends. 

The  dividends  which  a  corporation  may  legally  make  may 
be  divided  into  four  classes:  First,  cash  dividends;  second, 
stock  dividends ;  third,  bond  or  scrip  dividends ;  fourth,  prop- 
erty dividends.60 

§  216b.     Cash  Dividends. 

A  cash  dividend  is  the  ordinary  dividend  paid  in  money. 

§  21 6c.     Stock  Dividends. 

A  stock  dividend  is  one  payable  in  stock  of  the  company. 
When  the  corporate  assets  have  become  enhanced  beyond  the 
par  value  of  its  capital  stock  by  additions  or  improvements 
made  by  accumulating  profits  and  applying  them  in  this  way, 
or  from  other  causes,  the  nominal  capital  may  be  increased  to 
the  extent  of  the  actual  surplus  thus  acquired,  and  the  in- 
creased stock  may  be  distributed  among  the  shareholders  as 
dividends.51 

§  216d.     Scrip  and  Bond  Dividends. 

A  scrip  dividend  is  one  by  which  certificates  are  distributed 
as  dividends  among  the  stockholders,  giving  them  the  rights 
mentioned  in  them.  A  bond  dividend  is  one  declared  when  the 
corporation  has  a  bona  fide  surplus,  and,  as  evidence  of  that 
surplus  and  of  the  stockholders'  right  in  it,  bonds  are  issued 
pro  rata  among  the  stockholders,  instead  of  distributing  the 
surplus  in  cash.  Instead  of  declaring  a  bond  dividend,  the 
board  of  directors  may  issue  scrip  pro  rata  among  the  share- 
holders, certifying  that  they  are  entitled,  upon  the  sale  of 
the  surplus,  to  certain  rights  therein.52 

BO  2  Cook,  Corp.  §  534. 

6i  Gibbous  v.  Mahon,  136  U.  S.  549,  10  Sup.  Ct.  1057,  34  L.  Ed.  525 ; 
2  Cook,  Corp.  §  536,  and  notes ;  10  Cyc.  555,  and  cases  cited ;  2 
Clark  &  M.  Corp.  §  523,  and  notes. 

52  2  Cook,  Corp.  §  535,  and  notes:  10  Cyc.  555,  and  cases  cited;  2 
Clark  &  M.  Corp.  §  523,  and  notes. 

H70) 


§  216e  BUSINESS  CORPORATIONS.  (Ch.  9 

§  216e.     Property  Dividends. 

A  property  dividend  is  one  payable  in  specific  property, 
instead  of  cash,  bonds,  or  scrip.  The  surplus  accumulated  may 
be  in  the  shape  of  property  not  at  the  time  readily  convertible 
into  cash,  but  which  may  be  conveniently  divided  in  kind. 
Or  a  property  dividend  may  be  declared  where  a  corporation  is 
in  process  of  dissolution,  having  sold  all  its  assets  to  another 
corporation,  the  latter  distributing  stock  directly  among  the 
shareholders  of  the  former  company  as  the  purchase  price 
of  the  property  bought.  This  latter  kind  of  dividend  has  been 
declared  illegal  without  unanimous  consent  of  stockholders 
and  creditors.53 

§  217.     Creating  Bonded  Indebtedness. 

A  corporation  has  inherent  power  to  issue  bonds  for  the  pay- 
ment of  money,  and  no  express  power  need  be  given  to  that 
end.54  The  board  of  directors  may  authorize  the  creation  of 
this  class  of  indebtedness,  secured  by  mortgage  of  the  cor- 
porate property,  without  any  authorization  by  the  stockhold- 
ers for  this  purpose.56  A  stockholders'  meeting  for  the  pur- 
pose of  giving  this  authority  is  customary,  but  not  necessary.56 
Bonds,  unlike  stock,  may  be  issued  for  less  than  par,  in  the  ab- 
sence of  fraud.67 
i 

§  217a.     Classes  of  Bonds. 

Bonds  may  be  either  registered,  in  which  case  they  are  trans- 
ferable only  by  assignment  duly  registered  on  the  books  of 

63  Infra,  c.  XI ;  2  Cook,  Corp.  §  535,  and  notes ;  2  Clark  &  M.  Corp. 
§  523,  and  notes. 

a*  3  Cook,  Corp.  §  762,  and  notes ;   10  Cyc.  1167  et  seq. 

OR  3  Cook,  Corp.  §  808,  and  note;  3  Clark  &  M.  Corp.  §  691c,  and 
notes ;  Hodder  v.  Railroad  Co.  (C.  C.)  7  Fed.  793. 

se  3  Cook,  Corp.  §  808,  and  note;  Dill,  N.  J.  Corp.  4.  See  3  Clark 
&  M.  Corp.  §  696  and  notes. 

"  10  Cyc.  1169:   3  Cook,  Corp.  §  776,  and  note;    Gamble  v.  Water 
Co.,  123  N.  Y.  91,  25  N.  E.  201,  9  L.  R.  A.  527. 
(180) 


Ch.  9)  MEETINGS.  §  217b 

the  company  or  its  registrar,  and  the  principal  and  interest 
upon  them  are  payable  to  the  registered  owner  or  his  assigns 
by  check  or  in  cash;  or  coupon,  in  which  case  they  have  at- 
tached to  them  a  series  of  coupons,  each  representing  the  in- 
stallment of  interest  due  at  the  respective  interest  periods, 
which  coupons  are  payable  to  bearer.  Coupon  bonds,  as  well 
as  the  coupons  themselves,  usually  pass  from  hand  to  hand  by 
delivery.  Coupon  bonds  are,  however,  sometimes  registered. 
In  that  event  the  principal  of  the  bond  is  payable  only  to  the 
registered  owner  or  his  assignee.  Bonds  may  be,  and  generally 
are,  secured  by  mortgage,  but  they  may  be  entirely  unsecured. 

§  217b.     Form  of  Registered  Bond. 

United  States  of  America. 

State  of  

Company. 

Registered  Twenty  Year  Five  Per  Cent.  Gold  Bond. 
$ No 

Know  all  men  by  these  presents,  that  the Company,  a 

corporation  created  and  existing  by  virtue  of  the  laws  of  the  state 

of ,  for  value  received,  hereby  promises  to  pay  to  (fill 

in  name  of  registered  owner)  or  registered  assignee  on  the  first  day 
of ,  A.  D.  19. .,  at  the  office  of  the  National  Trust  Com- 
pany, in  the  city  of ,  state  of ,  the  sum  of 

one  thousand  ($1,000.00)  dollars  in  gold  coin  of  the  United  States  of 
America,  of  the  present  standard  of  weight  and  fineness,  and  to  pay 

interest  thereon  from  the  first  day  of ,  A.  D.  19..,  at 

the  rate  of  five  (5)  per  cent,  per  annum ;  such  interest  to  be  payable 
to  the  registered  owner  hereof  at  the  office  aforesaid,  in  like  gold 

coin,  semiannually,  on  the  first  days  of and 

in  each  year. 

All  payments  upon  this  bond,  both  of  principal  and  interest,  shall 
be  made  without  deduction  of  any  tax  or  assessment  which  the  said 
obligor,  or  its  successors  or  assigns,  may  pay  or  be  required  to  pay, 
deduct,  or  retain  under  any  law  or  regulation  heretofore  or  here- 
after enacted  by  the  United  States,  or  any  political  community  what- 
ever. 

This  bond  is  one  of  a  series  of  two  hundred  (200)  of  like  form, 
tenor,  effect,  amount,  and  date,  and  numbered  consecutively  from 

(181) 


§  2l7b  BUSINESS    CORPORATIONS.  (Cll.  9 

one  (1)  to  two  hundred  (200),  both  inclusive,  which  said  series  of 
bonds  is  limited  in  amount  to  two  hundred  thousand  ($200,000.00) 
dollars,  and  is  issued  in  pursuance  of,  and  in  accordance  with,  the 
terms  of,  and  is  secured  by,  a  certain  trust  deed  or  mortgage  of  even 
date  herewith,  duly  executed  by  said  obligor  to  the  National  Trust 
Company  as  trustee,  conveying  by  way  of  security  the  property  here- 
inafter described,  to  wit:  (Insert  description  of  property.) 

This  bond  and  said  trust  deed  or  mortgage  securing  same  were 
duly  authorized  by  the  stockholders  and  board  of  directors  of  the 
obligor  company  at  meetings  of  said  stockholders  and  directors  re- 
spectively duly  convened  and  held  at on  the 

day  of ,  A.  D.  19... 

In  case  of  default  in  payment  of  the  principal  or  any  installment 
of  interest  due  hereunder  for  a  period  of  six  months  after  the  same 
shall  respectively  mature,  the  property  secured  by  said  trust  deed 
or  mortgage  may  be  sold,  and  the  proceeds  applied  towards  the  pay- 
ment of  this  series  of  bonds  in  the  manner  specified  in  said  trust 
deed  or  mortgage.  No  recourse  shall  be  had  for  the  payment  of  the 
principal  or  any  installment  of  interest  of  or  upon  this  bond,  against 
any  stockholder,  officer,  or  director  of  the  obligor  company. 

This  bond  is  transferable  only  on  the  books  of  said  National  Trust 
Company  upon  the  surrender  and  cancellation  of  this  bond,  and 
thereupon  a  new  registered  bond  will  be  issued  to  the  transferee  in 
exchange  therefor. 

This  bond  shall  not  become  or  be  valid  until  authenticated  by 
the  certificate  indorsed  hereou.  duly  executed  by  the  said  National 
Trust  Company,  the  trustee  named  in  said  trust  deed  or  mortgage. 

In  witness  whereof  the  obligor  company  has  caused  these  presents 
to  be  signed  in  its  corporate  name  by  its  president,  and  its  corporate 
seal  to  be  hereunto  affixed,  attested  by  its  secretary,  at  the  city  of 

this day  of ,  A.  D.  19. .. 

Company, 

By  

[Corporate  Seal.]  President 

Attest:    , 

Secretary. 

Trustees1  Certificate. 

This  is  to  certify  that  this  bond  is  one  of  a  series  of  two  hundred 
(200)  bonds  described  in  the  trust  deed  or  mortgage  therein  men- 
tioned. National  Trust  Company, 

By   

Trust  Officer. 
(182) 


Ch.  9)  MEETINGS. 

§  217c.     Form  of  Coupon  Bond. 

United  States  of  America. 

State  of Company. 

Twenty  Year  Five  Per  Cent  Gold  Coupon  Bond. 
$1,000.00.  No 

Know  all  men  by  these  presents  that  the Company, 

a  corporation  created  and  existing  by  virtue  of  the  laws  of  the  state 

of ,  for  value  received,  hereby  promises  to  pay  on  the 

day  of  ,  A.  D.  19..,  at  the  office  of  the 

National  Trust  Company,  in  the  city  of ,  state  of , 

to  the  bearer,  or,  if  registered,  to  the  registered  holder  of  this  bond, 
the  sum  of  one  thousand  ($1,000.00)  dollars  in  gold  coin  of  the  United 
States  of  America,  of  the  present  standard  of  weight  and  fineness, 

and  to  pay  interest  thereon  from  the  first  day  of   ,  A. 

D.  19. .,  at  the  rate  of  five  (5)  per  cent,  per  annum ;  such  interest  to 
be  payable  at  the  office  aforesaid,  in  like  gold  coin,  semiannually, 

on  the  first  day  of and in  each  year,  but 

only  upon  presentation  and  surrender  of  the  respective  interest  cou- 
pons hereto  attached  as  they  severally  mature. 

All  payments  upon  this  bond,  both  of  principal  and  interest,  shall 
be  made  without  deduction  of  any  tax  or  assessment  which  the  said 
obligor,  or  its  successors  or  assigns,  may  pay  or  be  required  to  pay, 
deduct,  or  retain  under  any  law  or  regulation  heretofore  or  here- 
after enacted,  by  the  United  States,  or  any  political  community 
whatsoever. 

This  bond  is  one  of  a  series  of  two  hundred  (200)  of  like  form, 
tenor,  effect,  amount,  and  date,  and  numbered  consecutively  from 
one  (1)  to  two  hundred  (200),  both  inclusive,  which  said  series  of 
bonds  is  limited  in  amount  to  two  hundred  thousand  ($200,000.00) 
dollars,  and  is  issued  in  pursuance  of,  and  in  accordance  with  the 
terms  of,  and  is  secured  by,  a  certain  trust  deed  or  mortgage  of 
even  date  herewith,  duly  executed  by  said  obligor  to  the  National 
Trust  Company  as  trustee,  conveying  by  way  of  security  the  property 
hereinafter  described,  to  wit:  (Insert  description  of  property.) 

This  bond  and  said  trust  deed  or  mortgage  securing  the  same  were 
duly  authorized  by  the  stockholders  and  board  of  directors  of  the 
obligor  company  at  meetings  of  said  stockholders  and  directors,  re- 
spectively, duly  convened  and  held  at on  the 

day  of ,  A.  D.  19... 

In  case  of  default  in  payment  of  the  principal  or  any  installment 
of  interest  due  hereunder  for  a  period  of  six  months  after  the  same 

(183) 


§  2170  BUSINESS   CORPORATIONS.  (Ch.  9 

shall  respectively  mature,  the  property  secured  by  said  tmst  deed 
or  mortgage  may  be  sold,  and  the  proceeds  applied  towards  the  pay- 
ment of  this  series  of  bonds  in  the  manner  specified  in  the  said  trust 
deed  or  mortgage.  No  recourse  shall  be  had  for  the  payment  of  the 
principal  or  any  installment  of  interest  of  or  upon  this  bond  against 
any  stockholder,  officer,  or  director  of  the  obligor  company. 

This  bond  shall  be  transferable  by  delivery,  unless  registered  in 
the  owner's  name  on  the  books  of  said  National  Trust  Company, 
such  legistry  being  noted  on  the  bond  by  said  trust  company,  after 
which  no  transfer  shall  be  valid  unless  made  on  the  said  books  and 
likewise  noted  on  the  bond;  but  the  same  may  be  again  made  trans- 
ferable by  delivery  by  being  registered  on  said  books  in  the  name  of 
bearer.  Registration,  however,  shall  not  affect  the  transferability 
of  the  coupons  hereto  attached  by  delivery  merely ;  and  the  payment 
to  the  bearer  of  any  of  such  coupons  shall  discharge  the  obligor  in 
respect  of  the  interest  therein  mentioned,  whether  the  bond  shall 
have  been  registered  or  not. 

Neither  this  bond,  nor  any  coupon  for  interest  thereon,  shall  be- 
come or  be  valid  until  authenticated  by  the  certificate  indorsed  here- 
on,  duly  executed  by  the  said  National  Trust  Company,  the  trustee 
named  in  said  trust  deed  or  mortgage. 

In  witness  whereof  the  obligor  company  has  caused  these  presents 
to  be  signed  in  its  corporate  name  by  its  president,  and  its  corporate 
seal  to  be  hereunto  affixed,  attested  by  its  secretary,  and  coupons 
for  such  interest,  bearing  the  engraved  fac  simile  signature  of  its 

treasurer,  to  be  attached  hereto,  at  the  city  of this 

day  of ,  A.  D.  19... 

Company, 

By   

[Corporate  Seal.]  President 

Attest:     , 

Secretary. 

Form  of  Interest  Coupons. 

(Forty  in  Number.) 

$25.00.  No 

This  coupon  for  twenty-five  ($25.00)  dollars,  gold  coin  of  the  United 

States  of  America,  is  payable  to  bearer  on  the  first  day  of , 

A.  D.  19. .,  at  the  office  of  the  National  Tnist  Company  in  the  city  of 

,   state  of    ,   without   deduction   for  taxes, 

for  six  months'  interest  due  on  that  day  on  its  one  thousand  ($1,- 

000.00)  dollar  twenty  year  five  (5)  per  cent  gold  bond  No , 

(184) 


Ch.  9)  MEETINGS.  §  218 

subject  to  the  terms  of  said  bond,  and  the  trust  deed  or  mortgage 
therein  mentioned. 

Company, 

By    

Treasurer. 

(Note. — The  certificate  of  the  trustee  under  the  mortgage  will  be 
indorsed  as  in  form  217b. 

As  the  forms  of  mortgage  vary  in  the  different  states,  no  such  form 
is  inserted  here.  The  reader  is  referred  for  guidance  to  Dill  on  New 
Jersey  Corporations,  where  an  elaborate  form  is  set  forth.) 

§  218.     Filling  Vacancies. 

Directors  holding  over  after  the  date  for  election  has  passed 
are  just  as  much  directors  de  jure  as  if  they  had  been  re- 
elected  by  the  stockholders.  They  continue  in  office  until  their 
successors  are  elected,  or  until  they  die,  resign,  or  become  dis- 
qualified.58 A  quorum  of  the  board  of  directors  consists 
of  a  majority  of  its  members,  in  the  absence  of  a  statute  or  by- 
law to  the  contrary,59  although  such  a  by-law  may  be  validly 
made.  If  a  majority  is  in  attendance,  a  majority  of  that  ma- 
jority binds  the  board,  though  they  may  be  a  minority  of  the 
whole  board.60  When  vacancies  occur  in  the  board,  such  va- 
cancies must  ordinarily  be  filled  by  the  stockholders,  unless 
the  statutes,  charter,  or  by-laws  confer  that  power  upon  the 
directors,  as  is  now  generally  the  case.61  An  interesting  ques- 
tion has  arisen. as  to  whether,  in  such  an  event,  if  the  num- 
ber of  the  board  of  directors  be  reduced,  by  death,  resignation, 
disqualification,  or  otherwise,,  below  a  quorum,  those  remain- 
ing could  fill  the  vacancies.  It  is  generally  held  that  they 
cannot  do  so.62  Hence  statutes  have  been  passed  in  some  juris- 

ss  Thorington  v.  Gould,  59  Ala.  461;  10  Cyc.  740,  and  cases  cited; 
3  Clark  &  M.  Corp.  §  665,  and  cases  cited. 

r>9  2  Cook,  Corp.  bottom  page  1751,  and  note;  3  Clark  &  M.  Corp. 
§  681. 

602  Cook,  Corp.  bottom  page  1751 ;  3  Clark  &  M.  Corp.  p.  2087. 

ei  Id.  §  660. 

es  Faure  Electric  Accumulator  Co.  v.  Phillipart  (1888)  58  Law  T. 
(N.  S.)  525. 

(185) 


§  219  BUSINESS   CORPORATIONS.  (Cll.  9 

dictions,  and  charter  provisions  inserted  or  by-laws  adopted  in 
others,  to  prevent  this  interruption  to  the  smooth  running  of 
corporate  machinery. 

§  219.     Annual  Reports  to  the  State. 

Almost  universally  reports  are  required  to  be  filed  annually 
in  the  parent  state  by  all  corporations  chartered  thereby,  stating 
a  number  of  different  items  of  information.  The  filing  of  these 
reports  should  be  authorized  at  the  annual  meeting  of  the 
board,  and  the  secretary  should  be  careful  to  see  that  these 
reports  are  actually  filed ;  otherwise  a  heavy  statutory  penalty 
may  be  incurred.  The  form  of  these  reports  varies  to  such  an 
extent  that  it  would  be  useless  to  attempt  to  insert  such  a  form 
in  this  work,  especially  in  view  of  the  fact  that  printed  blanks 
for  this  purpose  can  always  be  obtained  at  the  office  of  the 
Secretary  of  the  State. 
(186) 


Ch.  10)  AMENDMENT  OF  CHARTER.  §  222 

CHAPTER  X. 

AMENDMENT  OF  CHARTER. 

§  220.  Statute  must  be  Followed. 

221.  Stockholders  Authorize  Amendment. 

222.  Notice  of  Meeting. 

223.  Manner  of  Voting. 

224.  Distribution  of  Stock  on  Increase. 

225.  Filing  Certificate  of  Amendment. 

§  220.     Statute  must  be  Followed. 

Before  the  corporation  has  progressed  very  far  with  its  busi- 
ness, it  may  discover  that  its  charter  is  not  properly  adapted 
to  the  work  in  hand,  and  that  it  will  be  advisable  to  amend  it  in 
several  particulars.  If  the  charter  has  not  been  obtained  by 
special  legislative  grant,  the  amendment  is  a  comparatively 
simple  matter:  but,  although  simple,  all  the  statutory  requi- 
sites must  be  complied  with,  or  there  is  danger  that  the  amend- 
ed charter  may  be  declared  null  and  void.1 

§  221.     Stockholders  Authorize  Amendment. 

The  various  state  statutes  prescribe  minutely  the  procedure 
in  such  cases.  The  amendment  must  almost  universally  be  au- 
thorized at  a  meeting  of  the  stockholders.  Action  by  the  di- 
rectors alone  will  not  generally  suffice.2 

§  222.     Notice  of  Meeting. 

To  authorize  amendments,  notice  of  the  meeting  must  be 
given  in  the  statutory  manner,  both  by  publication  and  by  mail. 
Such  notice  may,  however,  be  waived  by  the  unanimous  con- 

1  Day  v.  Insurance  Co.,  75  Iowa.  694,  38  N.  W.  113. 

2  2  Cook,  Corp.  §  499  et  seq. ;   1  Clark  &  M.  Corp.  §  57c. 

(187) 


§  223  BUSINESS   CORPORATIONS.  (Ch.  10 

sent  of  all  the  stockholders,  evidenced  either  by  their  expressed 
consent,  or  by  their  participation  in  the  meeting  without  ob- 
jection.3 

§  223.     Manner  of  Voting. 

The  vote  must  be  taken  precisely  as  the  law  prescribes,  and 
the  action  of  the  statutory  number  of  stockholders  will  be 
binding.  Sometimes  that  action  must  be  unanimous,  as  when 
the  charter  amendment  is  for  the  purpose  of  increasing  the 
authorized  capital  in  order  that  preferred  shares  may  be 
issued,  in  which  case  the  rights  of  no  dissenting  stockholder 
can  be  postponed  to  those  of  holders  of  preferred  stock,  un- 
less warrant  for  this  is  found  in  the  statutes.4  If  the  proposi- 
tion is  to  increase  the  capital  stock  by  a  further  issue  of  com- 
mon stock,  such  proposition  may  be  legally  authorized  by  a 
two-thirds  or  a  majority  vote,  depending  upon  the  statutory 
provision.  So  likewise  with  a  proposition  to  reduce  the 
capital  stock,  to  change  the  par  value  and  the  number  of 
shares,  to  change  the  corporate  name,  or  to  change  the  loca- 
tion of  the  principal  office. 

§  224.     Distribution  of  Stock  on  Increase. 

If  an  increase  of  stock  is  authorized,  the  existing  stock- 
holders must  be  given  the  right  to  subscribe  for  these  new 
shares  before  they  are  offered  to  the  public.  The  stockholders 
may,  of  course,  waive  their  right  by  failing  to  avail  themselves 
of  it  within  a  reasonable  time.6  But  this  principle  does  not 
apply  if  the  new  issue  of  stock  is  to  be  entirely  devoted  to  pur- 
chasing additional  property,  because,  if  it  should,  the  very 

s  Supra,  §  89a. 

*  10  Cyc.  569,  and  cases  cited ;  Jones  v.  Railroad  Co.,  67  N.  H.  119, 
38  Atl.  120. 

«  Way  v.  Grease  Co.,  60  N.  J.  Eq.  263.  47  Atl.  44 ;  2  Clark  &  M. 
Corp.  §  408 ;  10  Cyc.  543,  544,  and  cases  cited ;  1  Cook,  Corp.  §  286, 
and  notes. 

(188) 


Ch.  10)  AMENDMENT   OF   CHARTER.  §  225 

object  for  which  it  was  authorized  would  fail.8  If  it  is  desired 
to  sell  the  additional  shares  for  less  than  par,  then,  if  the  actual 
value  of  the  corporate  assets  justifies  a  stock  dividend,  this  is 
frequently  resorted  to.  By  unanimous  consent  of  the  stock- 
holders the  stock  thus  issued  to  them  by  way  of  dividends  is 
donated  back  to  the  company,  and  may  then  be  disposed  of  as 
full-paid  and  nonassessable  stock  for  less  than  its  face  value.7 

§  225.     Certificate  of  Amendment. 

After  an  amendment  has  been  properly  authorized,  the  next 
step  is  to  apprise  the  proper  authorities  of  the  state  of  this 
change.  This  is  usually  done  by  a  formal  certificate  under  the 
hand  and  seal  of  the  secretary,  giving  the  requisite  informa- 
tion. The  statutory  form  should  be  followed. 

e  Meredith  v.  Iron  Co..  55  N.  J.  Eq.  211,  37  Atl.  539,  affirmed  in 
56  N.  J.  Eq.  454,  41  Atl.  1116. 
T  Supra,  §  116. 

(189) 


§  226  BUSINESS   CORPORATIONS.  (Ch.  11 

CHAPTER  XI. 

REORGANIZATION  OF  CORPORATIONS. 

§  226.    Reasons  for. 
226a.  Voluntary  Sale. 

227.  Meeting  of  Stockholders  of  Old  Company. 
227a.  Resolution  Authorizing  Directors  to  Sell. 
227b.  Unanimous  Consent  Required. 

228.  Meeting  of  Directors  of  Old  Company. 

229.  Resolution  Directing  Proposition  of  Sale. 

230.  Proposition  for  Sale. 

231.  Meeting  of  Incorporators  of  New  Company. 

232.  Resolution  Authorizing  Directors  to  Purchase. 

233.  Meeting  of  Directors  of  New  Company. 

234.  Resolution  Accepting  Proposition  of  Sale. 

235.  Acceptance  of  Proposition. 

236.  Transfer  of  Property. 

237.  Methods  of  Transfer. 

238.  Form  of  Deed,  Etc. 

239.  Testimonium  Clause  for  Individuals. 

240.  Testimonium   Clause    for    Corporation    Contract   not    Under 

Seal. 

241.  Testimonium  Clause  for  Corporation  Contract  under  Seal. 

242.  Testimonium  Clause  for  Two  Corporations. 

243.  Form  of  Signatures. 

244.  Consequence  of  Improper  Signatures. 

245.  Payment  for  Property. 

246.  Donation  of  Stock. 

247.  Reorganization  Completed. 

§  226.     Reasons  for. 

It  may  be  found  that  an  amendment  to  the  charter  will  not 
place  the  corporation  upon  the  basis  desired,  and  that  a 
thorough  reorganization  will  have  to  be  resorted  to.  The  rea- 
sons for  this  may  be  various.  Possibly  the  laws  do  not  per- 
mit of  an  amendment  sufficiently  liberal  in  its  scope  to  accom- 
plish the  result  desired ;  or  perhaps  experience  may  have  dem- 
onstrated that  the  laws  of  the  parent  state  of  the  corporation 
(190) 


Ch.  11)       REORGANIZATION  OF  CORPORATIONS.       §  226a 

are  not  well  adapted  to  the  conduct  of  the  particular  enter- 
prise; or  it  may  be  that  it  is  desired  to  "freeze  out"  certain 
stockholders;  or  the  corporation  is  so  thoroughly  insolvent 
that  the  only  way  to  save  anything  from  the  wreck  is  to  sell  out 
to  a  new  corporation  and  dissolve  the  old  and  start  afresh. 
Sometimes  it  is  found  that  although  the  stock  is  issued  full 
paid  and  nonassessable  it  is  absolutely  necessary  to  raise  more 
money  to  carry  on  the  enterprise;  that  this  cannot  be  done 
by  an  increase  of  stock,  but  only  by  voluntary  assessment ;  and 
that  certain  stockholders  are  not  willing  to  bear  their  pro 
rata  share  of  this  added  burden.  In  that  event  it  is  not 
an  infrequent  practice  to  permit  the  assets  of  the  old  corpora- 
tion to  be  sold  out  and  bought  in  by  a  new  company  composed 
of  those  stockholders  in  the  old  who  are  willing  to  risk  more 
money  in  the  venture.  Whatever  the  reasons  which  underlie 
the  reorganization  may  be,  such  reorganization  usually  in- 
volves either  a  forced  or  voluntary  sale  by  the  old  company 
to  the  new,  and  the  issuance  of  stock  in  the  new  company  to  all 
or  a  few  of  the  stockholders  of  the  old,  upon  a  certain  basis. 

§  22 6a.     Voluntary  Sale. 

If  the  sale  of  the  corporate  assets  of  the  existing  company 
is  a  voluntary  one,  this  involves,  first,  a  meeting  of  the  stock- 
holders of  the  old  company ;  second,  a  meeting  of  the  directors 
of  the  old  company ;  third,  the  preparation  of  a  proposition  to 
;he  new  company  in  accordance  with  the  resolutions  passed  at 
the  two  meetings  last  above  referred  to ;  fourth,  a  meeting  of 
incorporators  of  the  new  company;  fifth,  a  meeting  of  the  di- 
rectors of  the  new  company ;  sixth,  the  acceptance  of  the  propo- 
sition above  referred  to;  seventh,  the  formal  transfer  of  the 
property ;  eighth,  payment  therefor  either  in  stock  or  in  cash. 
Taking  these  various  steps  in  order,  we  shall  first  discuss : 

(191) 


§  227  BUSINESS   CORPORATIONS.  (Cll.  11 

I. 

MEETING  OF  THE  STOCKHOLDERS  OF  THE  Our  COMPANY. 

§  227.  In  view  of  the  fact  that  this  is  a  meeting  to  consid- 
er business  outside  of  the  ordinary  objects  of  the  corpora- 
tion (which  are  to  conduct,  not  to  wind  up,  its  affairs),  particu- 
lar care  should  be  taken  to  advise  all  the  stockholders  of  the 
meeting,  and  of  its  time  and  place,  giving  this  notice  person- 
ally, and,  if  required  by  statute,  also  by  publication,  in  such 
form  and  for  such  length  of  time  as  the  law  prescribes.1 
The  usual  form  of  proxy  given  for  an  ordinary  meeting  cannot 
be  voted  upon  this  proposition  to  sell  the  entire  assets  of  the 
company.2 

§  227a.     Resolution  Authorizing  Directors  to  Sell. 

After  the  notice  of  the  meeting  has  been  read  and  the  ob- 
jects stated,  the  stockholders  should  pass  a  resolution  similar 
to  the  following: 

Whereas,  a  corporation  has  been  organized  under  the  laws  of  the 

state  of  known  as  the Company,  for  the 

purpose  of  conducting  business  similar  to  that  conducted  by  this 
company,  with  a  capital  stock  of  one  hundred  thousand  dollars, 
divided  into  one  thousand  shares ;  and 

Whereas,  it  is  the  judgment  of  the  stockholders  of  this  company 
that  it  is  expedient  to  sell  to  the  said  company  the  entire  plant, 
property,  and  assets  of  this  company,  provided  an  adequate  price 
can  be  obtained  therefor;  and 

Whereas,  no  stock  has  yet  been  issued  by  said  (fill  in  name  of  new 
company)  Company,  and  the  individual  incorporators  thereof  have 
agreed  that  in  case  the  proposition  authorized  by  this  resolution  is 
accepted  by  said  company  a  condition  of  said  acceptance  shall  be 
that  the  property  hereinabove  referred  to  shall  be  taken  to  include 

1  Mutual  Fire  Ins.  v.  Farquhar,  86  Md.  GGS.  39  Atl.  527 ;    People's 
Mut.  Ins.  Co.  v.  Westcott,  14  Gray  (Mass.)  440:    Jones  v.  Railroad 
Co.,  67  N.  H.  119,  38  Atl.  120 ;    Bagley  v.  Oil  Co.,  201  Pa.  78,  50  Atl. 
760,  56  L.  R.  A.  184. 

2  Smith  v.  Smith,  3  Desaus.  (S.  C.)  557. 

(192) 


Ch.  11)       REORGANIZATION  OF  CORPORATIONS.       §  227b 

the  subscription  price  agreed  to  be  paid  by  said  incorporators,  who 
are  five  in  number: 

Now,  therefore,  be  it  unanimously  resolved  that  the  directors  of 
this  company  be  and  they  are  hereby  authorized,  if  in  their  judg- 
ment it  is  expedient  so  to  do,  to  sell  to  said  Company 

the  entire  plant,  property,  and  assets  of  this  company  for  the  sum  of 
one  hundred  thousand  dollars,  to  be  paid  in  the  full-paid  and  non- 
assessable capital  stock  of  said Company  at  par,  said 

property  hereinabove  referred  to  be  taken  to  include  the  amount 

agreed  to  be  paid  by  the  five  incorporators  of  said  

Company,  the  stock  in  payment  therefor  to  be  issued  to  the  follow- 
ing distributees  in  the  amounts  set  opposite  their  respective  names, 
to  wit: 

(Note. — Here  should  be  inserted  a  schedule  containing  the  names 
of  the  incorporators  of  the  new  company,  opposite  which  will  be  set 
the  number  of  shares  subscribed  for  by  each  of  said  incorporators 
in  the  new  company,  which  will,  under  our  proposed  scheme,  gen- 
erally be  one  share  each.  Then  the  name  of  the  old  corporation 
should  follow  for  such  amount  of  stock  as  it  is  proposed  to  donate 
as  a  working  capital  for  the  new  company,  the  amount  of  this  dona- 
tion in  our  proposed  scheme  to  be  twenty-five  thousand  dollars. 
After  this,  the  names  of  the  stockholders  of  the  old  corporation 
should  be  inserted  in  the  schedule,  opposite  each  name  being  set  such 
number  of  the  balance  of  the  shares  in  the  new  company  as  will 
equal  his  proportionate  interest  in  the  old  corporation.) 

And  be  it  further  resolved  that  the  proper  officers  of  this  company 
be  and  they  are  hereby  empowered  to  execute,  acknowledge,  and  de- 
liver all  contracts,  deeds,  and  other  documents  necessary  and  proper 
for  carrying  into  effect  this  proposition,  if  the  same  shall  be  ac- 
cepted. 

And  be  it  further  resolved  that,  if  said  proposition  shall  be  ac- 
cepted, the  directors  of  this  corporation  be  and  they  are  hereby 

authorized  to  donate  to  said  Company  twenty-five 

thousand  dollars  par  value  of  the  stock  of  said  Com- 
pany, to  be  issued  directly  to  this  corporation  as  hereinabove  pro- 
vided, said  stock  so  to  be  donated  to  be  held  by  said  company  or 
by  trustees  for  its  benefit,  and  to  be  used  as  a  working  capital,  sub- 
ject to  the  orders  of  its  board  of  directors. 

§  227b.     The  arrangements  outlined  in  this  chapter  can  only 

be  effected  by  the  unanimous  consent  of  the  stockholders,  and 

not  then  unless  the  rights  of  all  the  creditors  are  protected. 

Otherwise  the  directors  would  expose  themselves  to  liability 

CLEPH.Brs.CoRp.— 13  (193) 


§  228  BUSINESS    CORPORATIONS.  (Ch.  11 

for  illegally  disposing  of  the  capital  to  the  detriment  of  cred- 
itors.3 Arrangements  should  be  made  for  paying  the  debts  of 
the  old  corporation  prior  to  the  transfer;  otherwise,  the  old 
stockholders  may  be  held  to  individual  liability  for  them,  or 
the  creditors  might  pursue  the  assets  in  the  possession  of  the 
new  company.4 

II. 
MEETING  OF  THE  DIRECTORS  OF  THE  OLD  COMPANY. 

§  228.  At  the  directors'  meeting  called  pursuant  to  au- 
thority conferred  as  above  by  the  stockholders,  a  resolution 
should  be  passed  directing  the  submission  to  the  new  company 
of  the  proposition  above  referred  to.  This  resolution  may  be 
in  the  following  form : 

§  229. 

Whereas,  the  stockholders  of  this  company  in  meeting  assembled 

for  this  purpose  on  the  day  of  ,  A.  D. 

19. .,  authorized  this  board,  if  in  its  judgment  it  is  expedient  so  to 

do,  to  submit  to  the Company,  a  corporation  organized 

and  existing  under  the  laws  of  the  state  of ,  the  propo- 
sition hereinafter  set  forth ;  and 

Whereas,  in  the  judgment  of  this  board  it  is  expedient  that  such 
proposition  should  be  submitted,  and,  if  accepted,  carried  into  effect: 

Now,  therefore,  be  it  resolved  that  the  proper  officers  of  this  com- 
pany be,  and  they  are  hereby,  empowered  and  directed  to  communi- 
cate to  the Company  aforesaid  a  proposition  to  sell  to 

the  said  company  the  entire  plant,  property,  and  assets  of  this  cor- 
poration for  the  sum  of  one  hundred  thousand  dollars,  to  be  paid  in 

full-paid  and  nonassessable  stock  of  the  said Company 

at  par,  said  property  hereinabove  referred  to  to  be  taken  to  inchide 
also  the  amount  agreed  to  be  paid  by  the  five  incorporators  of  said 

s  Noyes,  Intercorporate  Rel.  §  110  et  seq.,  and  notes.  See  Curran 
v.  Arkansas,  15  How.  (U.  S.)  304,  14  L.  Ed.  705;  Mason  v.  Mining 
Co.,  133  U.  S.  50,  10  Sup.  Ct.  224,  33  L.  Ed.  524 ;  Russell  v.  Post,  138 
U.  S.  425,  11  Sup.  Ct.  353,  34  L.  Ed.  1009 ;  2  Cook,  Corp.  §  671  et  seq. ; 
10  Cyc.  286 ;  Post  v.  Electrical  Co.,  84  Fed.  371,  28  C.  C.  A.  431. 

*  Id. ;   2  Cook,  Corp.  §  673,  and  notes ;   10  Cyc.  286,  and  notes. 
(104) 


Ch.  11)      REORGANIZATION  OF  CORPORATIONS.        §  230 

Company,  stock  in  payment  therefor  to  be  issued  to  the 

following  distributees  in  the  amounts  set  opposite  their  respective 
names. 

(Insert  schedule  as  in  stockholders'  resolution  outlined  in  §  227a.) 
And  be  it  further  resolved  that  the  proper  officers  of  this  com- 
pany be,  and  they  are  hereby,  empowered  and  directed  to  execute, 
acknowledge,  and  deliver  all  contracts,  deeds,  and  assignments,  and 
other  documents  necessary  and  proper  for  carrying  into  effect  said 

proposition  if  accepted,  and  that be,  and  he  is  hereby, 

appointed  attorney  in  fact  for  this  company,  for  it  and  in  its  name 
to  appear  before  any  officer  authorized  to  take  acknowledgments  of 
deeds,  and  acknowledge  all  proper  deeds  and  conveyances  for  and 
on  behalf  of  this  company  and  in  its  corporate  name. 

And  be  it  further  resolved  that,  if  said  proposition  is  accepted,  the 
proper  officers  of  this  company  are  empowered  and  directed  to  donate 
to  the  said Company  twenty-five  thousand  dollars  pat- 
value  of  the  stock  to  be  issued  to  this  company  in  part  payment  for 
the  property  aforesaid,  in  accordance  with  the  terms  of  the  resolu- 
tion of  the  stockholders  hereinabove  referred  to,  and  for  that  pur- 
pose to  execute  and  deliver  all  necessary  and  proper  assignments 
and  transfers  of  certificates  of  stock. 


III. 

PROPOSAL  FROM  THE  OLD  COMPANY. 

§  230. 

(Fill  in  date.) 
To  the Company — 

Gentlemen: 

Pursuant  to  resolutions  unanimously  adopted  at  meetings  of  the 
stockholders  and  directors  of  this  company  duly  convened  for  the 
purpose,  I  am  authorized  and  directed  to  communicate  to  you  the 
following  proposition: 

Our  company  proposes  to  sell  to  your  company  our  entire  plant, 
property,  and  assets  for  the  sum  of  one  hundred  thousand  dollars,  to 
be  paid  in  full-paid  and  nonassessable  capital  stock  of  your  com- 
pany at  par,  said  property  to  be  taken,  under  an  agreement  with  the 
individual  incorporators  of  your  company,  to  include  also  the  amount 
agreed  to  be  paid  by  them  on  account  of  their  subscriptions ;  stock 
in  payment  for  said  property  to  be  issued  to  the  following  distribu- 
tees in  the  amounts  set  opposite  their  respective  names: 

(Fill  in  this  schedule,  as  in  the  resolution  of  stockholders,  §  227a.) 

f!95) 


BUSINESS   CORPORATIONS.  (Ch.  11 

In  case  you  decide  to  accept  the  foregoing  proposition  I  am  in- 
structed to  say  that  our  company  will  donate  to  your  company,  or 
to  trustees  of  your  company  to  be  named  by  you,  twenty-five  thou- 
sand dollars  par  value  of  the  stock  to  be  issued  to  our  company  as 
above  suggested,  such  stock  to  be  held  and  used  by  y6ur  company  or 
its  trustees  as  aforesaid  for  your  benefit  as  a  working  capital,  subject 
to  the  orders  of  your  board  of  directors. 

Yours  very  truly, 


Secretary  Company. 

IV. 

MEETING  OF  INCORPORATORS  AND  SUBSCRIBERS  TO  THE  STOCK 
OF  NEW  COMPANY. 

§  231.  The  meeting  having  been  convened  in  the  manner 
pointed  out  in  chapter  V,  and  the  necessary  preliminaries  hav- 
ing been  disposed  of,  the  letter  of  the  secretary  of  the  old  com- 
pany will  be  read,  after  which  a  resolution  similar  to  that  fol- 
lowing should  be  adopted : 

§  232.     Resolution  Authorizing  Directors  to   Purchase. 

Whereas,  a  proposition  has  been  received  from  the  

Company  offering  to  sell  to  this  company  its  entire  plant,  property, 
and  assets,  for  the  sum  of  one  hundred  thousand  dollars,  to  be  paid 
in  the  full-paid  and  nonassessable  capital  stock  of  this  company  at 
par,  said  property,  under  an  agreement  with  the  individual  incor- 
porators  of  this  company,  to  include  also  the  amount  agreed  to  be 
paid  by  them  on  account  of  their  subscriptions,  said  proposition  also 
containing  an  offer,  in  case  of  its  acceptance  by  this  company,  to 
donate  to  this  corporation  or  trustees  to  be  named  by  it  twenty-five 
thousand  dollars  par  value  of  its  stock  to  be  issued  in  part  payment 
of  said  property,  said  stock  to  be  held  and  used  by  this  company  or 
its  trustees  as  aforesaid  for  its  benefit  as  a  working  capital,  subject 
to  the  orders  of  the  board  of  directors  of  this  corporation ;  and 

Whereas,  in  the  judgment  of  the  incorporators  and  subscribers  to 

the  capital  stock  of  this  company,  the  said  proposition  is  fair  and 

reasonable,  and  the  value  of  the  property  offered  is  equal  to  that 

of  the  stock  proposed  to  be  issued  in  payment  therefor,  and  such 

(19G) 


Ch.  11)      REORGANIZATION  OF  CORPORATIONS.        §  234 

property  is  necessary  to  enable  this  company  to  properly  conduct  its 
affairs: 

Therefore  be  it  resolved  that  the  board  of  directors  be  and  it  is 
hereby  authorized  and  requested,  if  in  its  judgment  it  is  expedient 
so  to  do,  to  accept  said  proposition  and  purchase  the  property  above 
mentioned  in  accordance  with  the  terms  thereof,  and  to  issue  stock  in 
payment  therefor,  to  the  following  distributees  in  the  amounts  set 
opposite  their  respective  names,  to  wit: 

(Insert  schedule  as  in  §  227a.) 

And  be  it  further  resolved  that  such  property  shall  be  accepted 
in  full  payment  of  the  subscriptions  of  the  individual  incorporators 
of  this  company,  and  said  incorporators  shall  be  released  from  all 
further  obligation  under  their  said  subscriptions. 

And  be  it  further  resolved  that and be. 

and  they  are  hereby,  appointed  trustees  to  receive  and  to  hold  the 
twenty-five  thousand  dollars  par  value  of  stock  to  be  donated  to  this 
company  under  the  terms  of  said  proposition,  in  accordance  with 
such  instructions  as  may  from  time  to  time  be  given  them  by  the 
board  of  directors. 

V. 

MEETING  OF  BOARD  OF  DIRECTORS  OF  NEW  COMPANY. 

§  233.  The  board  having  been  convened,  and  the  prelim- 
inary formalities  and  business  described  in  chapter  VII  having 
been  disposed  of,  the  proposition  under  consideration  will  then 
come  up  for  discussion,  and  if  looked  upon  favorably  the  fol- 
lowing resolution  should  be  passed,  or  one  in  a  similar  form : 

§  234.     Resolution  Accepting  Proposition  of  Sale. 

Whereas,  the  incorporators  and  subscribers  to  the  capital  stock 
of  this  company  in  meeting  duly  assembled  for  that  purpose  on  the 

day  of ,  A.  D.  19. . ,  authorized  this  board. 

if  in  its  judgment  it  should  be  expedient  so  to  do,  to  accept  a  propo- 
sition from  the  Company  to  purchase  from  it  its  en- 
tire plant,  property,  and  assets  for  the  sum  of  one  hundred  thousand 
dollars,  to  be  paid  in  full-paid  and  nonassessable  stock  of  this  com- 
pany at  par,  said  property,  under  an  agreement  with  the  individual 
incorporators  of  this  company,  to  include  also  the  amount  agreed 

to  be  paid  by  them  on  account  of  their  subscriptions ;   said 

Company  also  to  donate  to  this  company,  or  to  trustees  to  be  named 

(107) 


§  234  BUSINESS    CORPORATIONS.  (Ch.  11 

by  it,  the  twenty-five  thousand  dollars  par  value  of  the  stock  to  be 
issued  in  part  payment  for  said  property;  and 

Whereas,  in  the  judgment  of  this  board  said  property  is  of  the 
fair  value  of  one  hundred  thousand  dollars,  and  the  same  is  neces- 
sary to  enable  this  company  to  properly  conduct  its  affairs,  and  it 
is  expedient  that  said  proposition  should  be  accepted : 

Now,  therefore,  be  it  resolved  that  the  said  proposition  be.  and 
it  is  hereby,  accepted,  and  the  proper  officers  of  this  company  are 
hereby  empowered  and  directed  to  communicate  the  fact  of  said  ac- 
ceptance to  the  Company,  and  to  receive  on  behalf  of 

this  corporation  the  duly  executed  transfers  and  assignments  of  said 
property,  and  to  issue  in  exchange  therefor  certificates  of  the  capital 
stock  of  this  company  of  the  par  value  of  one  hundred  thousand 
dollars  full  paid  and  nonassessable,  in  the  names  of  the  following 
distributees,  in  the  proportions  set  opposite  their  respective  names, 
to  wit : 

(Insert  schedule  as  in  §  227a.) 

And  be  it  further  resolved  that  an  assessment  of  one  hundred  per 
cent,  be  levied  upon  the  shares  of  stock  subscribed  for  by  the  in- 
corporators,  and  that  this  company  accept  in  payment  of  said  sub- 
scriptions and  assessment  the  property  embraced  within  the  propo- 
sition aforesaid. 

And  be  it  further  resolved  that and be, 

and  they  are  hereby,  authorized  to  receive  the  twenty-five  thousand 
dollars  par  value  of  stock  to  be  donated  to  this  company  under  tho 
terms  of  said  proposition,  and  directed  to  hold  the  same  subject  to 
the  further  orders  of  this  board. 


VI. 

ACCEPTANCE  BY  NEW  COMPANY. 
§  235. 
To  the Company —  (Fill  in  date.) 

Gentlemen : 

In  accordance  with  resolutions  unanimously  passed  by  the  incor- 
porators  and  subscribers  to  the  capital  stock  of  our  company,  and 
by  the  board  of  directors  thereof,  in  meetings  duly  assembled,  I  am 
instructed  to  communicate  to  you  the  fact  that  your  proposition 

contained  in  a  letter  dated ,  to  sell  to  our  company  the 

entire  plant,  property,  and  assets  of  your  corporation  for  the  con- 
sideration and  upon  the  terms  therein  stated,  has  been  accepted,  and 
that  our  company  will  be  pleased  to  receive  from  you  at  an  early 
(198) 


Ch.  11)       REORGANIZATION  OF  CORPORATIONS.        §  238 

date  the  duly  executed  transfers  of  said  property,  In  return  for 
which  stock  will  be  issued  in  accordance  with  your  proposition  as 
submitted  in  said  letter. 

Respectfully,  , 

Secretary Company. 


VII. 

FORMAL  TRANSFER  OF  PROPERTY. 

§  236.     Real  Estate. 

If  the  property  or  any  part  of  it  consist  of  real  estate,  it 
should  be  transferred  by  deed  duly  executed  and  recorded. 
The  deed  should  recite  the  resolutions  both  of  the  stockholders 
and  directors,  and  it  is  well  also  to  have  recited  in  it  the  ap- 
pointment of  an  attorney  in  fact  to  acknowledge  the  deed.  This 
is  necessary  under  the  statutes  of  some  states. 

§  237.     Personal  Property. 

Any  portion  of  this  property  which  is  personal  estate  should 
be  transferred  by  bill  of  sale  prepared  and  executed  with  the 
same  formalities  as  in  the  case  of  a  deed,  and  subsequently 
recorded.  In  the  states  of  Minnesota,  Indiana,  New  York, 
Massachusetts,  Virginia,  and  Oregon,  and  in  the  District  of 
Columbia,  statutes  are  found  prohibiting  transfers  of  the  entire 
assets  of  any  person  or  corporation  without  first  notifying  the 
creditors,  and  declaring  such  transfers  void  unless  this  shall 
have  been  done.5  The  statutes  of  the  various  states  should  be 
consulted  before  preparing  bills  of  sale. 

§  238.     Forms  of  Deeds,  Etc. 

As  the  forms  of  deeds  and  bills  of  sale  vary  so  greatly  in 
different  jurisdictions,  no  forms  will  be  inserted  in  this  work. 

s  U.  S.  Senate  Report  2436,  58th  Cong.,  2d  Sess. ;  Act  Cong,  ap- 
proved April  28.  1904. 

(199) 


BUSINESS    CORPORATIONS.  (Ch.  11 

They  do  not  vary  materially  from  those  in  use  for  the  transfer 
of  individual  property,  except  that  the  resolutions  authorizing 
the  transfer  should  be  inserted  in  the  conveyance,  and  some- 
times an  attorney  in  fact  should  be  appointed  to  acknowledge 
the  instrument. 

§  239.     Testimonium  Clause. 

The  testimonium  clause  in  common  use,  consisting  of  the 
words,  "In  witness  whereof  the  said  parties  have  hereunto  set 

their  hands  and  seals  this day  of , 

A.  D.  19.  . .  .,"  is  not  adapted  to  corporations.  A  corporation 
has  no  hand,  and  therefore  cannot  execute  an  instrument  in 
that  way.  It  may  contract  under  seal  or  without  a  seal,  de- 
pending upon  the  subject-matter  of  the  contract.  The  old  rule 
that  a  corporation  can  only  contract  under  seal  has  long  since 
been  exploded,  and  it  is  now  settled  that,  unless  the  statute, 
charter,  or  by-law  direct  to  the  contrary,  a  corporation  need 
contract  under  seal  only  in  cases  where  an  individual  must 
do  so.* 

§  240.     Simple  Contract. 

The  ordinary  testimonium  clause  for  a  contract  between  an 
individual  and  a  corporation,  not  under  seal,  would  be  as  fol- 
lows : 

§  240a. 

In  witness  whereof  the  said  party  of  the  first  part  has  signed 
these  presents,  and  the  said  party  of  the  second  part  has  caused  its 
corporate  name  to  be  hereunto  subscribed  by  its  president  this 
day  of A.  D.  19. .. 

«  10  Cyc.  1004  et  seq. 
(200) 


Ch.  11)  REORGANIZATION    OF    CORPORATIONS.  §  244 

§  241.     Contract  under  Seal. 

If  the  same  contract  is  under  seal,  the  testimonium  clause 
may  be  as  follows: 

§  241a. 

In  witness  whereof  the  said  party  of  the  first  part  has  hereunto 
signed  his  name  and  affixed  his  seal,  and  the  said  party  of  the  second 
part  has  caused  its  corporate  name  to  be  hereunto  subscribed  by  its 
president,  and  its  corporate  seal  to  be  hereunto  affixed  by  its  secre- 
tary, this day  of ,  A.  D.  19. .. 

§  242.     Contracts  under  Seal  Between  Two  Corporations. 

If  the  two  contracting  parties  are  corporations,  the  testimo- 
nium clause  may  be  as  follows : 

§  242a. 

In  witness  whereof  the  parties  hereto  have  caused  their  respective 
corporate  signatures  to  be  hereunto  affixed  by  their  respective  presi- 
dents, and  their  corporate  seals  to  be  attached  hereto  by  their  re- 
spective secretaries,  this  day  of  ,  A.  D. 

19... 

§  243.     Signatures. 

All  legal  papers  requiring  execution  by  or  on  behalf  of  a 
corporation  should  be  executed  in  the  corporate  name,  and  not 
in  the  name  of  some  officer  as  such.  The  signature  should  be 

Company, 

By President. 

And  not 


Pres.  of  Company. 

§  244.     Consequence  of  Improper  Signature. 

Should  the  signature  be  individual,  although  followed  by  the 
title  of  the  officer  making  it,  as  in  the  last  illustration  given, 
there  is  great  danger  that  the  officer  so  signing  would  be  held 
individually  liable,  and  would  have  to  seek  his  redress  over 
against  the  corporation;  whereas  a  signature  in  the  corporate 

(201) 


§  245  BUSINESS    CORPORATION'S.  (Ch.  11 

name  does  not  bind  the  officer  personally,  but  only  the  corpora- 
tion itself.7  The  negotiable  instruments  law  now  in  force  in 
many  of  our  commercial  states  crystallizes  into  statute  form  a 
rule  of  the  common  law,  providing  that  the  mere  addition  of 
words  describing  a  party  signing  as  agent  or  as  filling  a  rep- 
resentative capacity,  without  disclosing  his  principal,  does  not 
exempt  him  from  personal  liability. 


VIII. 

PAYMENT  IN  STOCK. 

§  245.  For  a  full  treatment  of  this  subject  the  reader  is  re- 
ferred to  chapter  VIII. 

§  246.     Donation  of  Stock. 

After  the  twenty-five  thousand  dollars  par  value  of  stock 
shall  have  been  issued  to  the  old  company  in  accordance  with 
our  supposed  proposition,  the  old  company  will  then,  in  com- 
pliance with  its  promise,  transfer  the  same  to  the  new  company 
or  to  trustees  for  its  use. 

§  247.     Reorganization  Completed. 

Assuming  that  the  new  company  has  properly  met,  elected 
directors  and  officers,  adopted  by-laws,  and  gone  through  the 
necessary  formalities  hereinbefore  outlined  in  chapters  IV,  V, 
VI,  VII,  and  VIII,  the  process  of  reorganization  will  then  have 
been  completed,  and  the  new  company  will  be  ready  to  enter 
upon  the  prosecution  of  its  business. 

1 10  Cyc.  1036  et  seq. ;  2  Cook,  Corp.  §  722,  and  cases  cited. 
(202) 


GENERAL   INDEX. 


[THE  FIGURES  REFER  TO  SECTIONS.] 


ACCEPTANCE  OF  CHARTER,  101,  127. 
beyond  limits  of  parent  state,  87a. 

ACKNOWLEDGMENT, 

of  certificate  of  incorporation,  83,  84b. 
of  conveyances,  238. 

ADJOURNMENT, 

stockholders'  meeting,   125. 
directors'  meeting,  157. 

ADMINISTRATOR, 

right  to  transfer  stock,  194,  197. 
right  to  vote  by  proxy,  212. 

ADVERTISEMENT, 

of  meeting,  92,  95c,  95d. 

of  loss  of  certificate  of  stock,  201a. 

ADVISORY  COMMITTEE, 
by-laws  concerning,  137. 

AGENT, 

authorized  by  meeting  outside  of  parent  state,  72c. 
appointment  of  by  domestic  corporation,  119.  127. 
appointment  of  by  foreign  corporation,  14,  153. 
principal  liable  for  acts  of,  182. 

AGREEMENT  OF  INCORPORATION, 
see  "Certificate  of  Incorporation." 

AGREEMENT  TO  TAKE  STOCK, 
see  "Subscription  for  Stock." 

ALABAMA, 

voting  trusts,  213b,  213c. 
CLEPH.BUS.CORP.  (203) 


204  INDEX. 

[The  figures  refer  to  sections.] 
ALIEN, 

when  an  Incorporates,  49. 

AMENDMENT, 
what  amended, 

charter,  77,  220,  225. 

by-laws,  75,  77,  126a,  133,  134,  136,  137. 

minutes,  208. 
nature  of  amendment, 

increasing  capital  stock,  223. 

reducing  capital  stock,  223. 

changing  name,  223. 

changing  principal  office,  223. 
how  made, 

statutory  requirements  to  be  followed,  220. 

must  be  authorized  by  stockholders,  221. 

notice  of  meeting,  222. 

voting,  223. 

when  vote  unanimous,  223. 
legality  of  amendment, 

impairing  vested  rights,  K54,  223. 

rights  of  stockholders,  223. 

when  not  sufficient,  220. 
certificate  of  amendment,  225. 

APARTMENT  HOUSE  COMPANY, 
object  clause  for,  84g. 

APPEAL, 

effect  of,  from  order  authorizing  stock  transfer,  198. 

ASSESSMENT, 

notice  of,  91,  127,  187a. 
waiver  of  notice,  91,  91a,  127. 
resolution  authorizing,  149a,  187a. 
of  tax  on  bonds,  217b,  217c. 

ASSETS  AND  LIABILITIES, 

directors  disposing  of  assets,  71,  85b. 
proxies  cannot  be  voted,  211. 
voting  trusts,  21 3e,  213f. 
sale  of,  on  reorganization,  22Ga-246. 
creditors  must  be  notified.  237. 

ASSIGNMENT  OF  INSTALLMENT  CERTIFICATE, 
form  of,  187. 


INDEX.  205 

IThe  figures  refer  to  sections.] 
ATTACHMENTS, 

against  foreign  corporations,  42e. 

ATTORNEY, 

see  "Agent." 

to  acknowledge  deed,  229,  236,  238. 
by-laws  regarding,  137. 
appointment  of,  153. 
duties  in  preparing  papers,  93,  12t>. 
duties  relating  to  bonds,  146. 

AUTHENTICATION, 
of  bonds,  217b,  217c. 

B 

BALLOT, 

for  directors,  105-112.  136. 

BANK, 

designation  of,  151,  157. 

BILL  OF  SALE, 

on  reorganization,  226a-244. 

BONA  FIDE  HOLDER  FOR  VALUE, 

rights  of  in  stock  certificates,  200-202. 

BOND  (Indemnity), 

treasurer's,  146,  147,  157. 

lost  certificate  of  stock,  201a,  202. 

forms  of,  147,  202. 

BONDS, 

creating  bonded  indebtedness,  217-217c. 

classification  of,  217a. 

registered,  217a,  217b. 

coupon,  217a,  217c. 

secured  by  mortgage,  217a. 

issue  of  with  stock,  183. 

voting  privileges,  27  (14),  29  (15),  32  (15),  41. 

negotiability,  217a. 

bona  fide  holders  protected,  72a. 

conversion  of  stock  into,  177. 

BOND  DIVIDENDS, 

legality  of,  216a,  216d. 


206  INDEX. 

[The  figures  refer  to  sectionB.J 
BONUS, 

stock  issued  as,  183. 

BOOKS, 

purchase  of,  157. 

minute  book,  126,  126a,  127. 

evidence  of  right  to  vote,  108,  126. 

access  to,  207. 

kept  in  parent  state,  16-42,  119,  127. 

laws  of  Connecticut,  24  (9). 

Delaware,  27  (9). 

District  of  Columbia,  28  (9). 

Maine,  22  (9). 

Massachusetts,  23  (9). 

Nevada,  32  (9). 

New  Jersey,  20  (9). 

New  York,  25  (9). 

Porto  Rico,  33  (9). 

South  Dakota,  31  (9). 

Virginia,  29  (9). 

West  Virginia,  30  (9),  41b. 

BY-LAWS, 

function  of,  128. 

intent  in  preparation,  130. 

skill  in  preparation,  128. 

compared  with  charter,  77. 

differences  in,  131. 

classification  of,  133. 

inserting  statutes,  132. 
subject-matter, 

notice  of  meeting,  136,  137. 

duties  of  secretary,  136,  137. 

stockholders'  meetings,  136,  13 1. 

quorum,  136,  137,  218. 

special  meetings,  136,  137. 

order  of  business,  136,  137. 

directors,  65c,  72-72c,  136,  137. 

voting,  136,  137. 

proxies,  136,  137. 

inspectors  of  election,  13U,  137. 

elections,  136,  137. 

president,  136,  137. 


INDEX.  207 

[The  figures  refer  to  sections.] 
BY-LAWS— Cont'd. 

vice  president,  136,  137. 

treasurer,  136,  137. 

executive  committee,  136,  137. 

finance  committee,  137. 

advisory  committee,  137. 

officers,  136,  137. 

counsel,  137. 

vacancies,  136,  137. 

salaries,  136,  137. 

stock,  136,  137. 

transfer  of  stock,  13(5,  137. 

lost  certificates,  136,  137. 

dividends,  136,  137. 

seal,  136,  137. 

how  adopted,  10,  75,  84b,  87,  103,  104,  127,  129,  136,  137. 
how  amended,  75,  77,  84b,  134,  136,  137. 
effect  of, 

impairing  vested  rights,  134. 
form  of,  135-137. 
where  found, 

copied  in  minute  book,  12Ga. 


CALIFORNIA, 

voting  trusts,  21 3b. 

CANDIDATES, 

qualifications  of,  105a-108,  136. 
inspectors'  duties  regarding,  105a-108,  136. 

CAPITAL, 

see  "Stock." 

fixing  amount  of,  78-78b,  84B. 
amount  required  under  state  laws,  16-20,  78. 

Connecticut,  24  (4)  (5)  (10). 

Delaware,  27  (4)  (5)  (10). 

District  of  Columbia,  28  (4)  (5)  (10). 

Maine,  22  (4)  (5)  (10). 

Massachusetts,  23  (4)  (5)  (10). 
» Nevada,  32  (4)  (5)  (10). 

New  Jersey,  26  (4)  (5)  (10). 


208  INDEX. 

[The  figures  refer  to  sections.] 
CAPITAL— Cont'd. 

New  York,  23  (4)  (5)  (10). 

Porto  Rico,  33  (4)  (5)  (10). 

South  Dakota,  31  (4)  (5)  (10). 

Virginia,  29  (4)  (5)  (10). 

West  Virginia,  30  (4)  (5)  (10). 
what  constitutes,  11. 
fully  paid,  11. 
overissue  of,  165. 
stated  in  annual  reports,  154. 
debts  not  to  exceed,  11. 
increase  of,  92. 

CERTIFICATE, 

required  of  foreign  corporation,  14. 
of  amendment,  225. 
attesting  order  of  court,  194. 
attesting  copy  of  will,  195. 

CERTIFICATE  OF  INCORPORATION, 

nature  of, 

source  of  power,  57-59,  128. 
contract  of  incorporators,  60,  71. 
advantage  over  by-laws,  77. 
inconsistent  with  law,  57-59. 
commencement  of  corporate  life,  86. 
how  obtained,  55-57. 
contents,  60-81. 

name,  62,  63,  84b. 

duration,  81,  84b. 

objects,  64-65d,  84b. 

powers,  66-77,  84b. 

specifying  particular  powers,  66-77,  84a. 

to  conduct  business  in  other  states,  68,  84b. 

to  create  voting  trusts,  69. 

to  cumulate  votes,  70,  85c. 

to  directors  to  dispose  of  property,  71,  Sob. 

to  hold  extraterritorial  directors'  meetings,  72-72o.  S4b. 

to  directors  to  act  separately,  73,  85a. 

to  regulate  inspection  of  records,  74,  84b. 

to  directors  to  make  by-laws,  75,  84b. 

to  create  executive  committee,  76,  84b,  83. 


INDEX.  209 

[The  figures  refer  to  sections.] 
CERTIFICATE  OF  INCORPORATION— Cont'd. 

capital  stock,  78-78b,  84b. 

number  of  shares  subscribed,  80,  84b. 

preferred  stock,  84b. 

names  and  residences  of  incorporators,  79,  84b. 

principal  office,  84b. 

signatures,  57,  82,  84b. 

acknowledgment,  83,  84b. 
renewal  of,  81. 
amendment  of,  77. 
form  of,  84,  84b. 

United  States  Steel  Corporation,  84b. 

steel  corporation,  84b. 

mercantile  corporation,  84c. 

department  store,  84d. 

contracting  company,  84e. 

mining  company,  84f. 

apartment  house  company,  84g. 

CERTIFICATE  OF  STOCK, 

see  "Stock." 

by-laws  regarding,  136,  137. 
to  trustees  should  define  trust,  193a. 
negotiability,  200-202. 
voting  trusts,  213-213f. 
determining  form  of,  121,  127,  137,  150,  157. 
how  printed,'  188. 
stubs,  188. 

signatures,  136,  137,  179. 
seal,  136,  179. 

surrender  on  transfer,  201. 
cancellation  of,  188. 
issue  of  new  to  replace  lost,  201,  201a. 
recitals,  201. 

CHAIRMAN, 

election  of,  98,  127,  157. 

CHARTER, 

see  "Certificate  of  Incorporation." 
acceptance  of,  101,  127. 
copied  in  minute  book,  126a. 
amendment  of,  220-225. 
CLEPH.BUS.COBP. — 14 


210  INDEX. 

[The  figures  refer  to  sections.] 
CITIZENSHIP  OF  CORPORATIONS, 

constitutional  guaranties,  15. 

jurisdiction  of  federal  courts,  15,  38e. 

District  of  Columbia  corporations,  38e. 

COLLIN'S  RULES,  51-51f. 

see  "Subscriptions  for  Stock." 

COLORADO, 

voting  trusts,  213c. 

COMBINATIONS. 

see  "Voting  Trusts." 
uniting  capital,  3. 

COMITY, 

foreign  corporation  in  state,  13-15,  87e,  87f. 

COMMENCING  BUSINESS, 
stock  paid  in  before, 
Connecticut,  24  (5). 
Delaware,  27  (5). 
District  of  Columbia,  28  (5),  38c. 
Maine,  22  (5). 
Massachusetts,  23  (5). 
Nevada,  32  (5). 
New  Jersey,  26  (5). 
New  York,  25  (5). 
Porto  Rico,  33  (5). 
South  Dakota,  31  (5). 
Virginia,  29  (5). 
West  Virginia,  30  (f>). 

COMMON  STOCK, 

see  "Stock." 
definition  of,  160. 
form  of,  178a. 

CONGRESS, 

local  legislature  for  D.  C.,  38,  38a. 

CONNECTICUT, 

liberality  of  corporation  laws,  17. 

provisions  of  incorporation  law,  24. 

place  of  holding  stockholders'  meetings,  36. 


INDEX. 

[The  figures  refer  to  sections.] 
CONNECTICUT— Cont'd. 

place  of  holding  directors'  meetings,  36. 
no  annual  franchise  tax,  36a. 
voting  trusts,  36a,  213c. 

CONSIDERATION, 

stock  subscription  agreement,  51,  52. 
voting  trusts,  213d,  213e,  213f. 

CONSTITUENT  ACTS, 

stockholders'  meetings,  87. 
directors'  meetings,  72c,  138. 

CONSTITUTION, 

original  source  of  corporate  powers,  58,  59. 
restricting  state  rights,  14. 

CONTRACT. 

certificate  of  incorporation  constitutes,  60.  71-73. 

power  of  corporation  to  make,  72b. 

power  of  directors  to  make,  137. 

by  persons  not  sui  juris,  192. 

execution  of,  238-244. 

seal,  239. 

CONTRACTING  COMPANY, 

object  clause  for,  84e. 

COUNSEL, 

see  "Attorney." 
by-laws  concerning,  137. 

COUNTERSIGNED, 

effect  of  use  of  word,  182a. 

COUPON  BONDS, 

definition  of,  217a. 
form  of,  217c. 

COURTS, 

jurisdiction  of  federal  courts,  15,  38e. 
preventing  unfair  competition,  62. 
giving  effect  to  state  comity,  87f. 
granting  corporate  charters,  56. 
authorizing  transfer  of  stock,  194. 
effect  of  lack  of  jurisdiction,  197. 
effect  of  appeal,  198. 


212  INDEX. 

[The  figures  refer  to  sections.] 
CREDITORS, 

stockholders  are  not,  172a. 

enforcing  stockholders'  liability,  11 5a,  183. 

rights  of  a  purchaser  below  par,  183. 

consent  to  property  dividends,  21Ge,  227b. 

notification  of  sale  of  property  in  bulk,  237. 

CUMULATIVE  VOTING,  210. 
see  "Voting." 

D 

DAMAGES, 

for  breach  of  subscription  agreement,  51f. 

DEATH, 

partner,  6. 
stockholder,  10. 

DEBTS, 

liability  of  partners,  5. 

liability  of  withdrawing  partner,  7. 

liability  of  stockholder,  10. 

not  to  exceed  capital,  11. 

not  to  be  incurred  until  capital  paid  in,  25  (5). 

annual  reports  must  show,  25  (10). 

liability  of  director, 

Connecticut,  24  (8). 

Delaware,  27  (8). 

District  of  Columbia,  28  (8). 

Maine,  22  (8). 

Massachusetts,  23  (8). 

Nevada,  32  (8). 

New  Jersey,  26  (8). 

New  York,  25  (8). 

Porto  Rico,  33  (8). 

South  Dakota,  31  (8). 

Virginia,  29  (8). 

West  Virginia,  30  (8). 

DEED, 

on  reorganization,  226a.  230. 

DEFAULT, 

in  payment  on  bonds,  217b,  217c. 


INDEX.  213 

[The  figures  refer  to  sections.] 
DEFERRED  STOCK, 
definition  of,  164. 

DELAWARE, 

laws  patterned  after  New  Jersey,  40. 
liberality  of  incorporation  laws,  17. 
provisions  of  incorporation  law,  27. 
stock  issued  for  services,  41. 
judgment  of  directors  final  as  to  value,  41. 
place  of  holding  stockholders'  meetings,  41. 
cumulative  voting  not  permitted,  41. 
bonds  carrying  voting  rights,  41. 
directors  amending  by-laws,  75. 
fee  for  incorporating,  41a. 
annual  franchise  tax,  41a/ 
inheritance  tax,  41,  41c. 

DEPARTMENT  STORE, 
object  clause  for,  84d. 

DIRECTORS, 

see  "Number"  ;  "Residence" ;  "Meetings." 
number  and  qualifications  of,  16-42,  84b,  136,  137. 

Connecticut,  24  (7). 

Delaware,  27  (6)  (7). 

District  of  Columbia,  28  (6)  (7). 

Maine,  22  (6)  (7). 

Massachusetts,  23  (6)  (7). 

Nevada,  32  (6)  (7). 

New  Jersey,  26  (6)  (7). 

New  York,  25  (6)  (7). 

Porto  Rico,  33  (6)  (7). 

South  Dakota,  31  (7). 

Virginia,  29  (6)  (7). 

West  Virginia,  30  (6)  (7). 
~by-laics  regarding,  133,  136,  137. 
election  of,  85c,  87,  105-112,  127,  136,  137,  209,  210. 

vacancies  among,  218. 

holding  over,  218. 

powers  of,  65c,  113,  119,  121,  123,  136,  137,  150,  156,  156a,  216- 
216e,  217. 

signing  articles  of  incorporation,  82. 


214  INDEX. 

[The  figures  refer  to  sections.] 
DIRECTORS— Confd. 

to  act  without  meeting,  73,  85a,  215. 

Nevada,  32  (16). 

New  Jersey,  41b. 

West  Virginia,  30  (15),  41b. 
to  meet  beyond  parent  state,  72,  136,  137. 
to  fix  value  of  property  purchased,  lloa. 

Connecticut,  24  (2). 

Delaware,  41,  27  (2). 

District  of  Columbia,  28  (2).j 

Maine,  22  (2). 

Massachusetts,  23  (2). 

Nevada,  32  (2). 

New  Jersey,  41,  26  (2). 

New  York,  25  (2). 

Porto  Rico,  33  (2). 

South  Dakota,  31  (2). 

Virginia,  29  (2). 

West  Virginia,  30  (2). 
to  make  and  amend  by-laws,  75,  103,  129. 
to  amend  charter,  221. 
to  elect  officers,  113. 

to  vote  salaries  to  themselves,  123,  123a. 
to  assess  stock,  114. 
to  dispose  of  entire  property,  71,  85b. 
liability  of,  65a. 

Connecticut,  24  (8). 
Delaware,  27  (8). 
District  of  Columbia,  28  (8). 
Maine,  22  (8). 
Massachusetts,  23  (8). 
Nevada,  32  (8). 
New  Jersey,  26  (8). 
New  York,  25  (8). 
Porto  Rico,  33  (8). 
South  Dakota,  31  (8). 
Virginia,  29  (8). 
West  Virginia,  30  (8). 
removal  of,  136. 

DISSOLUTION, 

of  partnership,  6. 

for  reorganization  of  corporation,  22Ga,  - 


INDEX.  215 

[The  figures  refer  to  sections.] 
DISSOLUTION— Cont'd. 

voting  by  proxy  for,  211,  227. 

rights  of  preferred  stockholders,  78b,  84b,  172-176. 

dividends,  216. 

DISTRICT  OF  COLUMBIA, 

liberality  of  corporation  laws,  17. 

laws  not  national  in  scope,  38. 

laws  for  corporations  crude,  38b. 

laws  not  favorable  for  nonresidents,  38f. 

corporations  cannot  sue  in  federal  courts,  38e. 

provisions  of  incorporation  laws,  28. 

majority  of  trustees  must  reside  in  D.  C.,  38c. 

ten  per  cent,  of  capital  paid  in  before  commencing  business,  38c. 

stock  in  other  corporations,  38d. 

trustees  make  and  amend  by-laws,  75. 

no  initial  or  annual  franchise  tax,  38g. 

annual  report  must  state  indebtedness,  3Sc. 

rights  of  creditors  on  sale  of  property,  237. 

mandamus  proceedings  in,  38c. 

DIVIDENDS, 

how  declared, 

by-laws  concerning,  136,  137. 

declared  by  directors,  216-216e. 

discriminating  among  stockholders,  216. 

who  entitled  to,  216. 

out  of  profits  only,  172a,  216. 

voting  trusts,  213-213f. 

illegality  in  declaring, 

Connecticut,  24  (8). 

Delaware,  27  (8). 

District  of  Columbia,  28  (8). 

Maine,  22  (8). 

Massachusetts,  23  (8). 

Nevada,  32  (8). 

New  Jersey,  26  (8). 

New  York,  25  (8). 

Porto  Rico,  33  (8). 

South  Dakota,  31  (8). 

Virginia,  29  (8). 

West  Virginia,  30  (8). 


216  INDEX. 

[The  figures  refer  to  sections.] 
DIVIDENDS— Cont'd. 
classification  of,  216a. 

cash  dividend,  216a,  21Gb. 

stock  dividend,  216a,  216c.  224. 

scrip  dividend,  216a,  216d. 

bond  dividend,  216a,  216d. 

property  dividend,  216a,  21 6e. 

on  preferred  stock,  78b,  84b,  172-175. 

cumulative,  84b. 

on  founders'  shares,  163. 

on  deferred  stock,  164. 

on  special  stock,  166. 

guarantied,  162. 
annual  reports  must  show,  23  (10). 

DOMICILE, 

of  corporation,  13. 
citizenship  of  coi-poration,  15. 
selection  of,  16-43. 

DONATION  OF  STOCK, 
on  increase,  224. 
on  reorganization,  227a,  229,  230,  232.  234,  235,  246. 

DUMMY  INCORPORATORS, 
see  "Incorporators." 

DURATION  OF  CORPORATION, 
see  "Existence." 

E 

EJECTMENT, 

effect  of  extraterritorial  organization  meeting,  87c. 

ELECTION, 

see  "Meetings  of  Stockholders";  "Meetings  of  Directors";  "Vot- 
ing." 

ENEMIES, 

aliens  cannot  be  incorporators,  49. 

ESTOPPEL, 

to  question  corporate  existence,  87a. 

as  among  incorporators  and  stockholders,  60,  71-73,  87a,  87e,  215. 

as  against  corporation,  72b,  87a,  87e. 


INDEX.  217 

[The  figures  refer  to  sections.] 
ESTOPPEL— Cont'd. 

as  against  persons  dealing  with  corporations,  87a,  87d,  87e. 
state  estopped,  87e. 
state  not  estopped,  87b. 

EVIDENCE, 

minutes  as,  126. 

/ 
EXECUTIVE  COMMITTEE, 

charter  provisions  concerning,  76,  84b.  85. 

by-laws  concerning,  133,  136. 

election  of,  148,  157. 

meeting  of,  158. 

quorum  of,  84b.  85,  136. 

powers  of,  76,  84b,  85,  136. 

EXECUTOR, 

voting  by  proxy,  212. 
right  to  transfer  stock,  194, 

EXISTENCE, 
corporate,  10. 
de  facto  and  de  jure,  87a. 
under  state  laws,  16-20. 
stated  in  charter,  81,  84b. 
not  affected  by  infancy  of  incorporator,  47. 
commencement  of  life,  86. 
voting  trusts,  23  3e,  213f. 

EXPENSES, 

payment  of,  155,  157. 

of  voting  trusts,  213,  213f. 


FEDERAL  COURTS, 

jurisdiction  of,  15,  38e. 

FEES, 

required  on  organization, 
Connecticut,  24  (11). 
Delaware,  27  (11),  41a. 
District  of  Columbia,  28  (11),  38g. 
Maine,  22  (11). 
Massachusetts.  23  (11). 
Nevada,  32  (11). 


218  INDEX. 

[The  figures  refer  to  sections.] 
FEES — Cont'd. 

New  Jersey,  26  (11),  41a,  41b,  42-42b. 

New  York,  25  (11),  42-42b. 

Porto  Rico,  33  (11). 

South  Dakota,  31  (11). 

Virginia,  29  (11). 

West  Virginia,  30  (11),  41b. 

FINANCIAL  MANAGEMENT, 

by-laws  regarding,  133,  136,  137. 

FOREIGN  CORPORATION, 

state  comity,  13-15,  72b,  78a,  87e,  87f. 
appointing  attorney,  153. 
attachment  against,  42c. 

FORFEITURE  OF  STOCK, 
proceedings  to  declare,  387a. 
injunction  against,  187a. 

FORMS, 

acceptance  of  proposition  of  sale,  235. 

by-laws,  135-137. 

charter  U.  S.  Steel  Corporation,  84b. 

clause  authorizing  cumulative  voting,  85c. 

clause  authorizing  directors  to  sell,  85b. 

clause  authorizing  executive  committee,  85. 

clause  authorizing  directors  to  act  without  meetins.  Roa. 

clause  (object)  for  apartment  house  company,  84g. 

clause  (object)  for  contracting  company,  84e. 

clause  (object)  for  department  store,  84d. 

clause  (object)  for  mercantile  business,  84c. 

clause  (object)  for  mining  company,  84f. 

clause  (object)  for  steel  corporation.  84b. 

common  stock,  178a. 

corporate  signatures,  243. 

coupon  bond,  217c. 

coupons,  27c. 

indemnity  bond  for  lost  stock  certificate,  202. 

inspector's  oath,  107. 

inspector's  report,  110. 

notary's  certificate  to.  111. 
Installment  certificate,  185. 

assignment  of,  187. 
minutes  of  directors'  meeting,  157. 


INDEX.  219 

[The  figures  refer  to  sections.] 
FORMS— Cont'd. 

minutes  of  incorporators'  meeting,  127. 

notice  by  publication,  95c. 

notice  of  incorporators'  meeting,  95b. 

preferred  stock,  178b. 

proposition  of  sale,  230. 

proxy,  88. 

registered  bond,  217b. 

registrar's  certificate,  217b. 

resolutions, 

appointing  agent,  127. 

appointing  trustees  for  treasury  stock,  127,  157. 

approving  form  of  stock  certificate,  127. 

authorizing  exchange  of  property  for  stock,  127,  157. 

creating  and  defining  preferred  stock,  127. 

establishing  office,  127. 

fixing  salaries,  127. 

levying  assessment  on  stock,  157. 

(directors)  new  company  on  reorganization,  234. 

(incorporators)  new  company  on  reorganization.  232. 

(directors)  old  company  on  reorganization,  229. 

(stockholders)  old  company  on  reorganization,  227a. 

opening  bank  account,  157. 

secretary's  oath,  145. 

stock  subscription  agreement,  54. 
testiinouium  clause, 

simple  contract  with  individual,  240. 

specialty  between  corporations,  242a. 

specialty  with  individual,  241a. 
transfer  of  stock,  189. 
transfer  of  subscription,  94a. 
voting  trust,  213f. 
waivers, 

notice  of  assessment,  91  a. 

notice  of  directors'  meeting,  141. 

notice  of  incorporators'  meeting,  90. 

notice  of  meeting  to  increase  capital,  92a. 

FOUNDERS'  SHARES, 
definition  of,  163. 

FRANCHISE, 

corporate,  how  conferred,  55,  56. 
when  considered  as  asset,  11. 


220  INDEX. 

[The  figures  refer  to  sections.] 
FRAUDS, 

voting  trusts,  213-213d. 

FULL-PAID  STOCK, 
definition  of,  167. 

G 

GAS  COMPANIES, 

stock  in,  held  by  Massachusetts  corporations.  23  (1). 

GEORGIA, 

voting  trusts,  213c. 

GOOD  WILL, 

when  taken  into  account,  11. 

GUARANTIED  STOCK, 
definition  of,  162. 

GUARDIANS, 

right  to  transfer  stock,  394. 

H 

HAND, 

corporation  has  none,  239. 

HISTORY, 

development  of  corporate  idea,  1-12. 


ILLINOIS, 

voting  trusts.  21 3b. 

INCIDENTS, 

of  partnerships,  5-7. 
of  corporations,  10. 

INCLUSIO  UNIUS  EST  EXCLUSIO  ALTEKIUS, 
application  to  certificates  of  incorporation.  64,  66. 

INCORPORATORS, 

who  may  be,  14  49. 
Connecticut,  24  (6). 
Delaware,  27  (6). 
District  of  Columbia,  28  (6). 
Maine,  22  (6). 


INDEX.  221 

[The  figures  refer  to  sections.] 
INCORPORATORS—Cont'd. 

Massachusetts,  23  (6). 

Nevada,  32  (6). 

New  Jersey,  26  (6). 

New  York,  25  (6). 

Porto  Rico,  33  (6). 

South  Dakota,  31  (6). 

Virginia,  29  (6). 

West  Virginia,  30  (6). 
dummies.  37,  87g. 
procedure  when  nonresidents,  87g. 
names  and  residences  stated  in  charter,  79. 
rig  Jits  of, 

when  initial  meeting  held,  86-87g. 

notice  of  initial  meeting,  95. 

waivers,  89a-92a. 

payment  for  stock,  116a,  127,  227a,  229,  230,  232,  234,  235. 

issue  of  shares  to,  117,  127. 

INDEMNITY  BOND, 

for  lost  stock  certificate,  20la,  202. 
form  of,  202. 

INDIANA, 

rights  of  creditors  on  sale  of  property  in  bulk,  237. 

INFANTS, 

cannot  be  incorporators,  47. 
effect  of  infant  incorporators,  47. 

INHERITANCE  TAX, 
Connecticut,  24  (13). 
Delaware,  27  (13),  41,  41c. 
District  of  Columbia,  28  (13). 
Maine,  22  (13). 
Massachusetts,  23  (13). 
Nevada,  32  (13). 
New  Jersey,  26  (13),  41,  42. 
New  York,  25  (13),  42. 
Porto  Rico,  33  (13). 
South  Dakota,  31  (13). 
Virginia,  29  (13). 
West  Virginia,  30  (13),  41c. 


222  INDEX. 

[The  figures  refer  to  sections.] 
INITIAL  MEETING  OF  INCORPORATORS, 

see  "Meetings  of  Stockholders." 
where  held,  86-87g. 

INJUNCTION, 

against  forfeiting  stock,  187a. 

INSPECTION  OF  RECORDS, 
right  to,  74. 
regulation  of,  74,  84b. 

INSPECTORS  OF  ELECTION, 
qualifications  of,  105a,  136. 
appointment  of,  105a,  127,  136,  137. 
oath  of,  106,  107,  127. 
powers  of,  108a,  137. 
report  of,  109-112,  127. 
filing  report,  112. 

INSTALLMENT  CERTIFICATE, 
when  issued,  184. 
payments  indorsed  on,  186. 
assignment  of,  187. 
form  of,  185. 

INTEREST, 

on  bonds,  217-217c. 

INTERSTATE  COMMERCE, 
right  of  state  to  restrict,  14. 
corporations  with  alien  stockholders,  49. 

ISSUED  AND  OUTSTANDING  STOCK, 
IOWA. 

definition  of,  168. 

J 
JOINT  OWNERS, 

voting  by  proxy,  212. 
.    transfer  of  stock  by,  199. 

JURISDICTION, 

to  grant  charter,  87e. 

of  court  to  authorize  stock  transfer,  197. 


INDEX.  223 

[The  figures  refer  to  sections.] 

L 

LEGISLATION, 

conferring  charter  privileges,  55,  56,  58,  59. 

LIABILITY. 

of  partners,  5,  87d. 
effect  of  partner  withdrawing,  7. 

of  stockholders  and  directors,  10,  16-42,  80,  115a,  215,  2l7b,  217c. 
227b. 

Connecticut,  24  (8). 

Delaware,  27  (8). 

District  of  Columbia,  28  (8). 

Maine,  22  (8). 

Massachusetts,  23  (8). 

Nevada,  32  (8). 

New  Jersey,  26  (8). 

New  York,  25  (8). 

Porto  Rico,  33  (8). 

South  Dakota,  31  (8). 

Virginia,  29  (8). 

West  Virginia,  30  (8). 
for  purchase  price  of  stock,  183. 
of  officers  signing  contracts,  244. 
for  illegal  stock  transfer,  196-202. 
of  stock  registrar,  181-182a. 
of  corporation  for  registrar's  negligence,  181-182a. 

LICENSE  FEE, 

foreign  corporations,  14. 

LIFE  OF  CORPORATION, 
see  "Existence." 

LIST  OF  STOCKHOLDERS, 

see  "Books." 
how  made  up,  205. 
stockholder  entitled  to,  137,  205. 

LOAN, 

see  "Liability." 
interest  in  partnership,  7. 

LOST  CERTIFICATE  OF  STOCK 

rights  and  liabilities,  200-202. 
by-laws  concerning,  136. 


224  INDEX. 

[The  figures  refer  to  sections.] 
LOST  CERTIFICATE  OF  STOCK— Confd. 
issue  of  new  certificate,  201,  201a. 
indemnity  bond,  201a,  202. 

LUNATICS, 

transfer  of  stock  by,  192. 


M 

MAINE, 

liberal  incorporation  laws,  17. 
provisions  of  incorporation  laws,  22. 
stockholders'  meetings,  35. 
Inheritance  tax,  35b. 

MANDAMUS, 

to  compel  publication  of  report,  38c. 

MARRIED  WOMEN, 

when  incorporators,  48. 

MASSACHUSETTS, 

revision  of  corporation  laws,  12. 
liberality  of  incorporation  laws,  17. 
provisions  of  incorporation  laws,  23. 
holding  stock  in  other  corporations,  35c. 
stockholders'  meetings,  35. 
Inheritance  tax,  35b. 

rights  of  creditors  on  sale  of  property,  237. 
annual  report,  35c. 

MEETINGS  OF  DIRECTORS, 

see  "Quorum. ' 
general  principles  governing,  214. 

common  law  regarding,  72-72c. 

functions  of  directors,  156. 

powers  of  majority,  218. 

meetings  for  reorganization,  226a,  228,  234. 

charter  provisions  concerning,  72-72c,  73,  84b.> 

by-laws  concerning,  136-137,  218. 

when  directors  need  not  meet,  73,  85a,  215. 
time  of  holding,  140,  214. 
place  of  holding,  72-72c,  136-138,  214. 

Connecticut,  24  (7),  36. 

Delaware,  27  (7). 


INDEX.  225 

[The  figures  refer  to  sections.] 
MEETINGS  OF  DIRECTORS— Cont'd. 

District  of  Columbia,  28  (7). 

Maine,  22  (7). 

Massachusetts,  23  (7). 

Nevada,  32  (7). 

New  Jersey,  26  (7). 

New  York,  25  (7). 

Porto  Rico,  33  (7). 

South  Dakota,  31  (7). 

Virginia,  29  (7). 

West  Virginia,  30  (7). 
notice,  140,  157. 

waiver  of,  140,  141,  157. 
quorum,  137,  218. 

at  least  two  must  be  present,  87g. 

proxies,  139,  214. 
proceedings,  142-155. 

order  of  business,  137. 

preliminaries,  142,  157. 

reading  minutes,  143,  157. 

filling  vacancies,  218. 

election  of  officers,  137,  144,  157. 

salaries,  144,  157. 

executive  committee,  148,  157. 

secretary's  oath,  144a,  145,  157. 

treasurer's  bond,  146,  147,  157. 

assessment  on  stock,  149a,  157. 

directing  issue  of  stock,  149,  149a,  157. 

authorizing  sale  of  stock,  157. 

increase  of  stock,  149a,  157. 

form  of  stock  certificate,  150,  157. 

establishing  office,  152,  157. 

appointing  agent,  152,  153,  157. 

appointing  trustees  to  hold  treasury  stock,  157. 

authorizing  bank  account,  151,  157. 

payment  of  bills,  155,  157. 

declaring  dividends,  216-216e. 

issuing  bonds,  217-217c. 

authorizing  reports,  153,  154,  157,  219. 
minutes,  157. 

CLEPH. Bus. CORP. — 15 


226  INDEX. 

[The  figures  refer  to  sections.] 
MEETINGS  OF  STOCKHOLDERS, 

see  "Quorum." 
general  principles  governing, 

meetings  to  assess  stock,  91,  93  a,  114,  127. 

meetings  to  amend  charter,  220-223. 

meetings  to  increase  capital  stock,  92,  92a,  118 

meetings  for  reorganization,  226a-232. 

business  to  be  transacted,  95a,  209. 

minutes  should  show  all  proceedings,  97,  126. 

special  meetings,  136,  137,  203. 
time  of  holding,  89,  90,  136,  137. 

date  to  be  stated  in  annual  report, 
Virginia,  29  (10). 
Porto  Rico,  33  (10). 
place  of  holding,  34-35a,  S6-87g,  136,  137,  203. 

Connecticut,  24  (3),  36. 

Delaware,  27  (3),  41. 

District  of  Columbia,  28  (3). 

Maine,  22  (3),  35. 

Massachusetts,  23  (3),  35. 

Nevada,  32  (3),  39. 

New  Jersey,  26  (3),  41. 

New  York,  25  (3). 

Porto  Rico,  33  (3),  35. 

South  Dakota,  31  (3). 

Virginia,  29  (3),  35. 

West  Virginia,  30  (3),  41b. 
notice,  95-95d,  127,  136,  137.  203. 

waivers,  89a-92a,  100,  127,  203. 

reading  of,  100,  127. 
quorum.  96-96b. 

roll  call,  99,  127,  209. 

at  least  two  must  be  present,  87g. 

proxies,  35a,  87g,  88,  93,  99,  lOSa,  136,  137.  139,  211. 
proceedings, 

order  of  business,  136,  137. 

electing  chairman,  98,  127,  137. 

reading  of  call,  100,  127. 

reading  of  minutes,  208,  209. 

recognizing  transfer  of  subscription,  102,  127. 

acceptance  of  charter,  101,  127. 

adoption  of  by-laws.  103,  104,  127. 


INDEX.  227 

[The  figures  refer  to  sections.] 
MEETINGS  OF  STOCKHOLDERS— Cont'd. 

election  of  directors,  105-112,  127,  136,  137,  209. 
appointing  inspectors  of  election,  105-112,  127,  136,  137. 
voting,  210,  211. 
voting  trusts,  213-213f. 
election  of  officers,  113,  127,  209. 
fixing  salaries,  123,  123a,  127. 
exchange  of  stock  for  property.  115-11 6b,  127. 
issue  of  incorporators'  shares,  117,  127. 
issue  of  stock  to  charter  limit,  118,  127.  / 
preferred  stock,  122,  127. 
form  of  stock  certificate,  121,  127. 
establishing  office,  119,  127. 
appointing  agent,  119,  127. 
adoption  of  corporate  seal,  120,  127. 
adjournment,  125,  127,  209. 
annual  reports,  206,  209. 

MERCANTILE  BUSINESS, 
object  clause  for,  84c. 

MINING  COMPANY, 
object  clause  for,  84f. 

MINNESOTA, 

rights  of  creditors  on  sale  of  property  in  bulk,  237. 

MINORS, 

transfer  of  stock  by,  192. 

MINUTES, 

read  at  meetings,  208,  209. 

approval  of,  208,  209. 

amending,  208,  209. 

signature  to,  126b. 

documents  appended  to,  127. 

of  incorporators'  meetings,  97,  126,  127,  143. 

form  of,  127. 

of  directors'  meeting,  157. 

MISSOURI, 

rights  of  corporation  with  alien  stockholders,  49. 

MORTGAGE, 

securing  bonds,  217a-217c. 

authorized  beyond  parent  state  valid,  72a,  72b. 

powers  of  directors  to  mortgage,  217. 


228  INDEX. 

[The  figures  refer  to  sections.] 

N 

NAME  OF  CORPORATION, 

words  denoting  corporate  character,  63. 
not  to  conflict  with  other  corporations.  62. 
similarity  in  names,  62. 
to  be  displayed  at  office  entrance,  26  (10). 
change  of,  223. 

NAMES  OF  INCORPORATORS, 
see  "Incorporators." 

NAMES  OF  OFFICERS, 

see  "Officers  and  Agents." 

NEGOTIABILITY, 
stock,  200-202. 

certificates  not  negotiable,  200. 
dividends,  216. 
voting  trusts,  213-213f. 
bonds,  217a. 

NEGOTIABLE  INSTRUMENT  LAW, 
signatures  to  contracts,  244. 

NEVADA, 

distant  from  eastern  capitalists,  39. 
liberal  incorporation  laws,  17,  39. 
provisions  of  incorporation  laws,  32. 
directors  need  not  meet,  73. 
no  annual  franchise  tax,  39. 

NEW  JERSEY, 

liberal  incorporation  laws,  17,  40,  41  a. 
provisions  of  incorporation  laws.  26. 
stockholders  must  meet  in  state,  41. 
resident  directors  required,  41b. 
stock  issued  for  services,  41,  42. 
judgment  of  directors  conclusive,  41. 
directors  amending  by-laws,  75. 
cumulative  voting,  41. 
voting  trusts,  41,  213b-213d. 
annual  reports,  41b. 
fee  for  incorporating,  41a,  41b,  42. 
annual  franchise  tax,  41a,  41b,  42,  42a. 
comparative  tax  tables,  42a. 
collateral  inheritance  tax,  41,  42. 


INDEX.  229 

[The  figures  refer  to  sections.] 
NEW  YORK, 

incorporation  laws  borrowed  from  New  Jersey,  42. 

liberal  incorporation  laws,  17. 

best  state  for  domestic  incorporations,  42d. 

disadvantage  of  incorporating  elsewhere,  42. 

provisions  of  incorporation  laws,  25. 

stock  issued  for  services,  42. 

inspectors'  report  must  be  filed,  112. 

voting  trusts,  213b-2l3d. 

rights  of  creditors  on  sale  in  bulk,  237. 

taxation,  42. 

comparative  tax  tables,  42a. 

inheritance  tax,  42. 

NONRESIDENTS, 

as  incorporators,  22-43,  45. 

NONRESIDENT  CORPORATION, 
see  "Foreign  Corporation." 

NORTH  CAROLINA, 
voting  trusts,  21 3c. 

NOTARY  PUBLIC, 

certificate  to  inspectors'  report,  111. 
authentication  of  certificate,  83. 

NOTICE  OF  MEETING, 

statutory  requirements  to  be  followed,  95a,  203. 

issued  by  whom,  95a. 

incorporators'  meeting,  89a,  90,  95,  127. 

directors,  140. 

to  assess  stock,  91,  91a,  127. 

to  increase  capital,  92,  92a,  127. 

to  amend  charter,  222. 

to  dissolve,  227. 

voting  trust,  213f. 

requisites  of,  95a,  203. 

form  of,  95b. 

notice  by  publication,  95c,  95d. 

form  of  notice  by  publication,  95c. 

waiver  of  notice,  89a-92a,  127. 

reading  notice,  100,  127,  157. 


230  INDEX. 

[The  figures  refer  to  section s.1 
NUMBER, 

of  directors,  16-42. 

how  stated  in  charter,  84b. 
Connecticut,  24  (7). 
Delaware,  27  (7). 
District  of  Columbia,  28  (7). 
Maine,  22  (7). 
Massachusetts,  23  (7). 
Nevada,  32  (7). 
New  Jersey,  26  (7). 
New  York,  25  (7). 
Porto  Rico,  33  (7). 
South  Dakota,  31  (7). 
Virginia,  29  (7). 
West  Virginia,  30  (7). 
of  stockholders  under  voting  trust,  213e. 

NUMBER  PRESENT  AT  MEETING, 
must  be  at  least  two,  87g. 


0 

OATH  OF  SECRETARY, 

administered  at  directors'  meeting,  144a. 
form  of,  145,  157. 

OBJECTS, 

of  corporations,  16-20. 

state  laws  regarding,  20,  33  (10). 

how  stated  in  certificate,  64-G5d,  84b. 

Dill's  views,  65a. 

clauses  defining,  84-84g. 

steel  corporation,  84b. 

mercantile  business,  84c. 

department  store,  84d. 

contracting  company,  84e. 

mining  company,  84f. 

apartment  house  company,  84g. 

OFFICE, 

establishing,  119,  127,  152,  157. 


INDEX.  231 

[The  figures  refer  to  sections.] 
OFFICERS  AND  AGENTS, 

by-laws  regarding,  133,  136,  137,  157. 

appointment  and  removal,  84b,  113,  127,  136,  137,  144,  209 

salaries,  123,  123a,  127,  136,  137,  144. 

powers  limited  by  by-laws,  10. 

signing  contracts,  244. 

voting  trusts,  213a. 

names  stated  in  annual  report,  154. 

Connecticut,  24  (10). 

Delaware,  27  (10). 

'Maine,  22  (10). 

Massachusetts,  23  (10). 

Nevada,  32  (10). 

New  Jersey,  26  (10). 

Porto  Rico,  33  (10). 

Virginia,  29  (10). 

West  Virginia,  30  (10). 

OHIO, 

voting  trusts,  213c. 

OREGON, 

rights  of  creditors  on  sale  of  property  In  bulk,  237. 

ORGANIZING  CORPORATIONS, 

when  incorporators  nonresidents,  87g. 

beyond  parent  state,  86-87g. 

time  for  meeting,  89-90. 

existence  dates  from  organization,  86. 

ORIGIN, 

of  partnerships,  2. 
of  corporations,  9. 

OUSTER, 

judgment  of,  87b,  115a. 

OVERISSUED  STOCK, 
definition  of,  165. 

P 

PAR  VALUE, 

stock  cannot  be  sold  under.  HG-116b,  183,  224. 
to  be  stated  in  charter,  78. 


-'32  INDEX. 

[The  figures  refer  to  sections.] 
PARTNERSHIP, 

origin,  2. 

legal  incidents,  5. 

power  of  partners,  5. 

liability  of  partners,  5,  7. 

death  of  partner,  6. 

withdrawal  of  partner,  7. 

pledge  of  interest,  7. 

sale  of  interest,  7.  » 

dissolution,  6. 

futility  of,  4. 

voting  by  proxy,  212. 

PATENTS, 

when  an  asset,  11. 

PAYMENT  FOR  STOCK, 

see  "Stock" ;  "Capital." 

PENNSYLVANIA, 

voting  trusts,  213b-213d. 

PLACE  OF  HOLDING  MEETINGS, 

see  "Meetings  of  Stockholders" ;  "Meetings  of  Directors." 

POOLING  AGREEMENT, 

see  "Voting  Trusts." 

PORTO  RICO, 

liberal  incorporation  laws,  17. 
provisions  of  incorporation  laws,  33. 
stockholders'  meetings,  35. 
directors  amending  by-laws,  75. 

POST  OFFICE  ADDRESS, 
of  incorporators,  79. 

POWER  OF  ATTORNEY, 

distinguished  from  proxy,  212. 
voting  trust,  213-213f. 

POWERS, 

of  partners,  5. 

of  corporations,  10,  11  a. 

source  of,  58,  59. 

under  state  laws,  1&-42. 

excessive  powers,  58. 


INDEX.  233 

[The  figures  refer  to  sections.] 
POWERS— Cont'd. 

implied  powers,  64-67. 

clauses  defining,  84-85c. 

statement  of  in  certificate  of  incorporation,  66-77,  S4b. 

statement  of  in  by-laws,  77. 

to  conduct  business  elsewhere,  68,  84b. 

to  create  voting  trusts,  69. 

to  cumulate  votes,  70,  85c. 

to  directors  to  dispose  of  property,  <1,  85b. 

to  hold  directors'  meetings  outside  of  state,  72-72c,  84b. 

to  directors  to  act  separately,  73,  83a. 

to  regulate  inspection  of  records,  74,  84b. 

to  create  executive  committee,  76,  84b,  85. 

to  issue  bonds,  217. 

to  directors  to  make  by-laws,  75,  84b. 

PREFERRED  STOCK, 
definition,  161. 
right  to  create,  78b,  122. 
expediency  of  creating,  177. 
preferences  stated  in  charter,  78b,  84b. 
by-laws  relating  to,  137. 
resolution  creating,  127. 
preferences  plainly  stated,  173-176. 
dividends  upon,  172a-175. 
cumulative  dividends,  172a-175. 
conversion  into  bonds,  177. 
form  of,  178b. 

PRESIDENT, 

election  of,  113,  137. 
duties  of,  136,  137,  179. 
signing  minutes,  12Gb. 
powers  of,  136,  137. 

PRINCIPAL  OFFICE, 

establishing,  119,  127,  152,  157. 
changing,  223. 

stating  location  in  charter,  84b. 
stating  location  in  annual  report, 

Connecticut,  24  (10). 

Delaware,  27  (10). 

Maine,  22  (10). 

Massachusetts,  23  (10). 


234  INDEX. 

[The  figures  refer  to  sections.] 
PRINCIPAL  OFFICE— Cont'd. 
Nevada,  32  (10). 
New  Jersey,  26  (10). 
Porto  Rico,  33  (10). 
Virginia,  29  (10). 

PRIVILEGES, 

foreign  corporations,  15. 

PROMISSORY  NOTE, 
signatures,  87d. 
defences,  87d. 

PROMOTERS, 

signing  agreement  for  subscriptions,  52,  54. 

PROPERTY  DIVIDENDS, 
legality  of,  216a,  216e. 

PROPERTY  EXCHANGED  FOR  STOCK, 
see  "Stock." 

PROPOSED  CORPORATION, 
aims  of,  18. 

PROXY, 

right  to  vote  by,  211. 

scope  of  powers,  211. 

revocable,  211. 

distinguished  from  power  of  attorney,  212. 

by-laws  relating  to,  212. 

prepared  in  advance  of  meeting,  93. 

directors  not  entitled  to  give,  139,  214. 

voting  trusts,  213-213f . 

for  stockholders'  meetings,  35a,  136,  137. 

record  of,  99. 

powers  of  inspectors  relating  to,  108a. 

to  dissolve  corporation,  227. 

given  by  nonresident  incorporators,  87g. 

executors,  212. 

administrators,  212. 

trustees,  212. 

corporation,  212. 

partnership,  212. 

joint  owners,  212. 
form  of,  88. 


INDEX.  235 

[The  figures  refer  to  sections.] 
PUBLICATION, 

notice  of  meeting,  95c,  137,  227. 
manner  of  publishing,  95d,  137. 

PUBLICITY, 

Massachusetts  ideas,  12. 

PUBLIC  POLICY, 

effect  on  doctrine  of  comity,  13-15. 
voting  trusts,  213-213d. 

PURCHASE, 
see  "Sale." 

Q 

QUORUM, 

what  constitutes,  96-96b,  136,  137. 

must  be  at  least  two,  87g. 

effect  of  by-laws,  218. 

of  directors,  137,  218. 

action  by  directors  in  the  absence  of,  73. 

of  executive  committee,  84b,  136. 


R 

REAL  ESTATE, 

right  of  foreign  corporations  to  hold,  49,  72b 

held  by  aliens,  49. 

held  by  companies  having  alien  stockholders,  49. 

REASONS, 

for  incorporating,  3-8,  10. 

for  selecting  particular  domicile,  16-42. 

RECEIPT  FOR  PAYMENTS, 

issued  when,  184. 

RECORD, 

every  corporate  act  recorded  in  South  Dakota,  37a. 

RECORDS, 

see  "Books." 
regulating  inspection  of,  74,  84b. 

REGISTERED  BONDS, 
definition  of,  217a, 
form  of,  217b. 


236  INDEX. 

[The  figures  refer  to  sections.] 
REGISTRAR  OF  STOCK, 
liability  of,  181. 

REGISTRATION, 

effect  of  on  bonds,  217c. 

RELATION, 

corporation  and  state,  11. 

REORGANIZATION, 
reasons  for,  226. 
voluntary  sale,  226a. 
meetings   required,  226a-234. 
proposition  of  sale,  226a-235. 
transfer  of  property,  226a-244. 
notice  of  meeting,  227. 
proxy,  227. 
resolution  of  stockholders  of  old  company,  227a. 

directors  of  old  company,  229. 
unanimous  consent  required,  227b. 
resolution  of  incorporators  of  new  company,  232. 

directors  of  new  company.  234. 
accepting  proposition  of  sale,  235. 
deed,  236,  238. 

appointment  of  attorney  in  fact,  236. 
bill  of  sale,  237,  238. 
notifying  creditors,  237. 
payment  in  stock,  245,  246. 
when  completed,  247. 

REPORTS, 

under  state  laws,  16-42,  153,  154,  157,  219. 

Connecticut,  24  (10). 

Delaware,  27  (10). 

District  of  Columbia,  28  (10),  38c. 

Maine,  22  (10). 

Massachusetts,  23  (10),  35c. 

Nevada,  32  (10). 

New  Jersey,  26  (10). 

New  York,  25  (8)  (10). 

Porto  Rico,  33  (10). 

South  Dakota,  31  (10). 

Virginia,  29  (10). 

West  Virginia,  30  (10),  41b. 
of  officers  submitted  annually,  206,  209. 


INDEX.  237 

[The  figures  refer  to  sections.] 
RESIDENCE, 

of  corporation,  15-43. 

procedure  when  incorporators  nonresident,  87g. 
of  incorporators  and  directors,  16-42. 
to  be  stated  in  charter,  79. 
Connecticut,  24  (6). 
Delaware,  27  (6). 
District  of  Columbia,  28  (6),  38c. 
Maine,  22  (6). 
Massachusetts,  23  (6). 
Nevada,  32  (6). 
New  Jersey,  26  (6),  41  b. 
New  York,  25  (6). 
Porto  Rico,  33  (6). 
South  Dakota,  31  (6),  37. 
Virginia,  29  (6). 
West  Virginia,  30  (6),  41b. 

RESTRAINT  OF  TRADE, 
voting  trusts,  213-213d. 

REVOCABILITY, 

stock  subscription  agreement,  51  b,  51  e. 
proxy,  211. 

ROLL  CALL, 

at  incorporators'  meeting.  99,  127. 
at  stockholders'  meeting,  209. 
at  directors'  meeting,  157. 


s 

SALARIES, 

determining  amount  123,  123a,  127,  136,  137,  144,  157. 

SALE. 

partnership  interest,  7. 

stock,  116-116b,  157. 

less  than  par,  116-116b,  183,  224. 

by  way  of  forfeiture,  187a. 

under  voting  trusts,  213-213f. 

of  entire  assets,  226a-238. 

SCRIP  DIVIDENDS, 

legality  of,  216a,  216d. 


238  INDEX. 

[The  figures  refer  to  sections.] 
SEAL, 

adoption  of,  120,  127. 

by-laws  concerning,  136,  137. 

to  corporate  contracts,  23&-242a. 

to  stock  subscription  agreements,  52. 

to  stock  certificates,  179. 

authentication  of,  83. 

voting  trusts,  213e. 

SECRETARY, 

election  of,  98,  136,  137. 

appointed  by  directors'  meeting  beyond  state,  72c. 

by-laws  concerning,  136,  137. 

oath  of,  144a,  145,  157. 

duties  of,  204-207,  226a-235. 

retaining  inspectors'  reports,  112. 

signing  minutes,  126b. 

signing  stock  certificates,  179. 

annual  reports,  219. 

powers  of,  136,  137. 

SERVICES  IN  EXCHANGE  FOR  STOCK, 
see  "Stock." 

SIGN, 

display  of,  119,  127. 

SIGNATURE, 

by  whom  to  subscription  agreement,  52. 

to  certificate  of  incorporation,  82,  84b. 

to  certificate  of  stock,  179. 

corporation  bound  to  know  stockholders'  signatures,  191. 

how  stockholders'  signatures  preserved,  191. 

authentication  of  notary's  signature,  83. 

form  of  signature,  243,  244. 

SOUTH  DAKOTA, 

liberal  incorporation  laws,  17. 
provisions  of  incorporation  laws,  31. 
life  of  corporation.  20. 
incorporators  residing  in  state,  37. 
stock  in  other  corporations,  37a. 
every  corporate  act  recorded;  37a. 
no  annual  franchise  tax,  37b. 


INDEX.  239 

[The  figures  refer  to  sections.] 
SPECIAL  STOCK, 
definition  of,  166. 

STATE, 

relation  of  corporation  to,  11. 

STATES, 

favorable  for  incorporating,  17. 
rapidly  changing  corporation  laws,  17. 

STATUTES, 

conferring  corporate  privileges,  55-61. 
insertion  in  by-laws,  132. 
voting  trusts,  213-213f. 

STEEL  CORPORATION, 
charter  for,  84b. 

STOCK, 

see  "Subscriptions  for  Stock" ;  "Certificate  of  Stock." 
subscriptions,  50-54. 

amount  of  stated  in  charter,  80-82. 
amount, 

stated  in  charter,  78,  118. 

increase  of,  92,  92a,  118,  127,  149a,  157,  216c,  223.  226. 

distribution  of  on  increase,  224. 

reduction  of,  223. 
classification, 

classes  stated  in  charter,  78b,  84b. 

preferred  stock,  78b,  122,  127,  161,  162,  172~178t>. 

common  stock,  160. 

guarantied  stock,  162. 

founders'  shares,  163. 

deferred  stock,  164. 

overissued  stock,  165. 

special  stock,  166. 

treasury  stock,  170. 

watered  stock,  171. 
payment  for, 

sale  of,  10,  157,  183,  224. 

fully  paid,  11,  115-116b,  149,  167,  184. 

assessment  of,  114,  127,  149a,  157,  187a. 

nonpayment  of  assessment,  184,  187a. 

forfeiture  of,  187a. 


240  INDEX. 

[The  figures  refer  to  sections.] 
STOCK— Cont'd. 

issued  as  bonus,  183. 
installment  certificate.  184-187. 

payments  indorsed  on,  186. 

assignment  of,  187. 

payment  in  property,  services,  etc.,  115-116b,  127,  149,  137, 
167,  224. 

Connecticut,  24  (2)  (5). 

Delaware,  27  (2)  (5),  41. 

District  of  Columbia,  28  (2)  (5). 

Maine,  22  (2)  (5). 

Massachusetts,  23  (2)  (5). 

Nevada,  32  (2)  (5). 

New  Jersey,  26  (2)  (5),  41,  42. 

New  York,  25  (2)  (5),  42. 

Porto  Rico,  33  (2)  (5). 

South  Dakota,  31  (2)  (5). 

Virginia,  29  (2)  (5). 

West  Virginia,  30  (2)  (5),  41  b. 

issue  of,  10,  16-20,  116a,  117,  127,  149,  165,  168,  169,  183,  184. 
by  laws  regarding,  133,  136,  137. 
signatures,  179. 
seal,  179. 

registrar,  181-182a. 
countersignature.  182a. 
stubs  for  certificates,  188. 
in  other  corporations,  84b. 
Connecticut,  24  (1). 
Delaware,  27  (1). 
District  of  Columbia,  28  (1),  38d. 
Maine,  22  (1). 
Massachusetts,  23  (1),  35c. 
Nevada.  32  (1). 
New  Jersey,  26  (1). 
New  York,  25  (1). 
Porto  Rico,  33  (1). 
South  Dakota,  31  (1),  37a. 
Virginia,  29  (1). 
West  Virginia,  30  (1). 
dividends,  172a,  216-210e. 
voting  trusts,  213-213f. 


INDEX.  241 

[The  figures  refer  to  sections.] 
STOCK— Cont'd. 

transfer,  180-202. 

negotiability,  200-202. 
lost  certificate,  136,  137,  201-202. 
pledge  of,  200. 
taxation, 

inheritance  tax,  35b,  41,  41c,  42. 

STOCK  BOOKS, 

see  "Books." 

STOCK  DIVIDENDS, 
legality  of,  216a,  216c. 
sale  of  stock  under  par,  224. 

STOCKHOLDERS, 

see  "Meetings  of  Stockholders." 
corporations  cannot  subscribe  for  stock.  46. 
when  corporations  cannot  be  stockholders,  46. 
are  not  creditors,  172a. 

comparative  protection  afforded  by  charter  and  by-laws,  77. 
functions  of,  156,  221. 
by-laws  regarding,  133. 
signatures  filed  with  secretary.  191. 
making  and  amending  by-laws,  75,  103.  104.  129. 
electing  officers,  113. 

right  to  object  to  exchanging  stock  for  property,  lloa. 
right  to  stock  on  increase,  224. 
right  to  inspect  records,  74,  127. 
usually  concur  in  mortgage.  217. 
organizing  voting  trusts,  233-213f. 

STUBS, 

for  stock  certificates,  188. 

SUBSCRIPTIONS  FOR  STOCK,  50-54. 
formal  agreement  not  necessary,  50. 
legality  of  subscription  agreements,  50-54. 
Professor  Collin's  rules,  51-51f. 
preliminary  agreement  not  mutual  contract,  51a. 
revocability  of  agreement,  51b. 
effect  of  organization  of  corporation,  51b,  51c. 
consideration  for,  51d,  52. 
distinction  between  subscriptions  and  agreements  to  subscribe, 

ole. 
CLEPH. Bus. CORP. — 16 


242  INDEX. 

[The  figures  refer  to  sections.] 
SUBSCRIPTIONS  FOR  STOCK— Cont'd. 

damages  for  breach,  51  f. 

requisites  of  agreement,  52,  53. 

signature  of  promoter,  52. 

uncertainty  in,  53. 

number  of  shares  stated  in  charter,  80. 

transfers  of,  94,  94a,  102,  127. 

form  of  agreement,  54. 

SUITS, 

on  subscription  agreements,  187a. 
in  federal  courts,  38e. 

SURETIES, 

to  be  approved,  146. 

SURETY  COMPANY, 

blank  forms  to  be  scrutinized,  146. 

SURPLUS, 

distributed  as  dividends,  216-216e. 


T 

TAXATION, 

under  state  laws,  16-42,  78a. 

Connecticut,  24  (12)  (13),  36a. 

Delaware,  27  (12)  (13),  41,  41a,  41c. 

District  of  Columbia,  28  (12)  (13),  38g , 

Maine,  22  (12)  (13). 

Massachusetts,  23  (12)  (13). 

Nevada,  32  (12)  (13). 

New  Jersey,  26  (12)  (13),  41,  41a.  41b,  42,  42a,  42b. 
I  New  York,  25  (12)  (13),  42,  42a,  42b. 

Porto  Rico,  33  (12)  (13). 

South  Dakota,  31  (12)  (13),  37b. 

Virginia,  29  (12)  (13). 

West  Virginia,  30  (12)  (13),  40,  41b,  41c. 
information  derived  from  charter,  79. 
bonds,  217b,  217c. 

TESTIMONIUM  CLAUSE, 

for  corporations,  239. 
corporation  has  no  hand,  239. 


INDEX.  243 

[The  figures  refer  to  sections.] 
TESTIMONIUM  CLAUSE— Cont'd. 
seal,  239-242a. 

simple  contract  with  individual,  240-240a. 
specialty  with  individual,  241-241a. 
specialty  between  corporations,  242a. 

THEORIES, 

relations  between  corporation  and  state,  11,  17. 

TIME  OF  INITIAL  MEETING  OF  INCORPORATORS, 

statutory  provisions,  89-90. 
to  be  stated  in  notice,  95a. 
waiving,  89a-90. 

TIME  OF  MEETING  OF  DIRECTORS,  140,  214. 

TITLE  TO  REAL  ESTATE, 

in  corporation,  not  stockholders,  49. 

TRADE-MARKS, 

when  ato  asset,  11. 

TRANSFER  BOOKS, 

see  "Books." 
closing  of,  205. 

TRANSFER  OF   STOCK,  189-202. 

see  "Stock." 

by-laws  concerning,  130.  137. 
right  to  transfer,  190-202. 
not  full  paid,  187. 

personal  attendance  of  transferrer,  191. 
persons  not  sui  juris,  192. 
lunatics,  192. 
minors,  192. 
trustees,  193-199. 
giiardians,  194. 
executors,  194,  195,  199. 
administrators,  194,  197. 
joint  owners,  199. 
rights  of  third  persons,  193. 
order  of  court,  197,  198. 

effect  of  appeal,  198. 
after  books  closed,  205. 
under  voting  trusts,  213-213d. 
surrender  of  old  certificate,  201. 
form  of,  189. 


244  INDEX. 

[The  figures  refer  to  sections.] 
TRANSFER  OF  SUBSCRIPTION, 

when  used,  94. 

recognition  of,  102,  127. 

form  of,  94a. 

TREASURER, 

powers  and  duties  of,  136.  137,  179. 
opening  bank  account,  151,  157. 
bond  of,  146,  147,  157. 

TREASURY  STOCK, 
definition  of,  170. 
received  by  donation,  116,  127. 

TRUSTEES, 

terms  of  trust  should  be  stated  in  certificate.  193a. 

under  voting  trusts,  213-213f. 

directors  are,  73,  139. 

stock  subscription  agreement,  51  d,  52. 

to  hold  treasury  stock,  11Gb,  127,  157. 

certificate  on  bonds,  21 7b. 

voting  by  proxy,  212. 

right  to  transfer  of  stock,  193,  199. 

TRUSTS, 

see  "Voting  Trusts." 

u 

UNFAIR  COMPETITION  IN  BUSINESS, 
similarity  of  names,  62. 
inspection  of  records,  74. 

UNISSUED  STOCK, 
definition  of,  169. 

UNITED  STATES  STEEL  CORPORATION,  84b. 
charter  of,  84b. 
by-laws  of,  137. 

V 

VACANCIES, 

by  whom  filled,  218. 

among  directors  how  filled,  84b.  136,  137,  218. 

effect  of  charter  or  by-laws,  218. 


INDEX.  245 

[The  figures  refer  to  sections.] 
VICE  PRESIDENT, 
duties  of,  136,  137. 
powers  of,  136,  137. 

VIRGINIA, 

liberal  incorporation  laws,  17. 
provisions  of  incorporation  laws,  2!t. 
stockholders'  meetings,  35. 
rights  of  creditors  on  sale  of  property,  237. 

VOTING, 

see  "Voting  Trusts." 
power  given  in  charter,  70,  85c. 
each  share  entitled  to  one  vote,  96b,  136,  137. 
quorum,  96-96b,  136,  137. 
at  directors'  meetings,  142. 
for  directors,  105-112,  136,  137. 
votes  cast  for  ineligible  candidate.  108a-. 
majority  governs,  96a,  105. 
privileges  attached  to  preferred  stock,  172-176. 
to  amend  charter,  223. 
by  proxy,  211. 
cumulative,  210. 

Nevada,  32  (14). 

New  Jersey,  26  (14),  41. 

New  York,  25  (14). 

Porto  Rico,  33  (14). 

South  Dakota,  31  (14). 

Virginia,  29  (14). 

West  Virginia,  30  (14). 

VOTING  TRUSTS, 

description  of,  213. 
legality  of,  69,  213-213f. 
where  operative,  213b-213d. 
permitted  by  charter,  69. 

Connecticut,  24  (14),  36a. 

New  Jersey,  26  (15),  41. 

New  York,  25  (15). 

West  Virginia,  41c. 

form  of,  213t 


246  INDEX. 

[Tbe  figures  refer  to  sections.] 

w 

WAIVER, 

what  constitutes,  89a.  203,  222. 

obtained  in  advance  of  meeting,  93. 

record  of,  100,  127,  157. 

of  notice  of  incorporators'  meeting,  90,  1'27. 

of  meeting  for  assessment,  91,  91a.  127. 

of  meeting  to  increase  capital,  92,  92a,  127. 

of  directors'  meeting,  140,  141. 

WASHINGTON, 

rights  of  corporation  having  alien  stockholders,  49. 

WATERED  STOCK, 
definition  of,  171. 

WEST  VIRGINIA, 

pioneer  in  liberality,  40. 

favorite  state  with  incorporators.  17. 

provisions  of  incorporation  laws,  30. 

life  of  corporation,  20. 

stockholders'  meetings  held  extra-territorially,  41b. 

directors  need  not  be  residents,  41  b. 

action  of  majority  of  directors  valid  outside  of  meeting,  41b,  73. 

stock  issued  for  services  rendered,  41b. 

no  statutory  authority  for  voting  trusts,  41c. 

no  corporate  books  kept  in  state,  41b. 

reports  very  meager,  41b. 

fee  for  incorporating,  41b. 

annual  franchise  tax,  41b. 

inheritance  tax,  41c. 

WILL, 

transfer  of  stock  by  trustee  under,  193-199. 

WISCONSIN, 

rights  of  corporations  having  alien  stockholders,  49. 

WITHDRAWAL  FROM  SUBSCRIPTION  AGREEMENT, 
see  "Subscriptions  for  Stock." 


WEST  FL'ELIblUNG  CO.,  PRLNTEBS  AND   BTEKEOTTl  i.KS,  ST.  FALL,  JUJJN. 


LOS 


J^ 


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